Publicis buys Razorfish from Microsoft

10 August 2009

PARIS: Publicis Groupe, the French marketing services conglomerate, has agreed to buy Razorfish, the digital advertising agency, from Microsoft, in a deal valued at $530 million (€373m; £319m), as it aims to increase the revenues it generates from new media.

Earlier this year, the holding group and Microsoft signed a five-year tie-up under which the Paris-based company committed to buying a minimum amount of display and search ads from the US firm in return for preferential pricing arrangements.

As part of its acquisition of Razorfish, Publicis will now issue 6.5 million treasury shares, valued at €162m, to the IT giant, with the rest of the payment coming from its cash reserves.

Microsoft became the owner of Razorfish – which boasts clients including Best Buy and Starwood Hotels – in 2007, when it bought aQuantive.

The agency will remain as the "preferred provider to Microsoft for digital strategy, creative and experiential marketing services," a joint statement from Publicis and Microsoft said.

Moreover, Microsoft has made a "commitment ... to spend a minimum amount for those services each year during the term of the agreement."

According to Maurice Lévy, ceo of Publicis, "the price paid was the result of an auction process", in which it was said to have beaten off competition from WPP Group and Dentsu.

"When we complete this transaction, approximately a quarter of our annual revenues will come from digital communications, and we believe we have more capacity to grow with new clients," Lévy added.

This means that the organisation will have met its target of deriving 25% of revenues from non-traditional media by end of 2010, compared with a total of 20.8% at the end of June this year.

Overall, the price of Razorfish was between 1.4 and 1.5 times that of its revenue, which Lévy argued was consistent with takeovers in the sector, but he also ruled out making any further major acquisitions.

"There is no more big-scale acquisition left to make in digital, Razorfish was the last one. And there aren't any in emerging markets."

“Thus one shouldn't expect Publicis to make further large acquisitions in the short or medium-term," he said.

Razorfish will continue to operate under its brand name, and will join the VivaKi division of Publicis, which housed agencies including Digitas, Starcom MediaVest Group and ZenithOptimedia.

Data sourced from Wall Street Journal/Publicis; additional content by WARC staff