Three of Japan’s ad agencies are to establish a new holding company in a bid to challenge the stranglehold of Dentsu on the domestic market.

Hakuhodo, Daiko Advertising and Yomiko Advertising – numbers two, five and six respectively in the Japanese ad sector – plan to integrate their operations into a single group. The move is expected to herald further consolidation of the nation’s advertising industry.

The combined trio – which will become the world’s eighth largest agency with billings of over ¥1000 billion ($8bn; €8bn; £5bn) – will still not be able to overtake Dentsu as Japan’s largest ad group. Although Hakuhodo is already number two, its billings last year totalled ¥722.2bn compared with the market leader’s ¥1789.4bn.

Nevertheless, the merger will put the three shops in a better position to compete. Together they will claim a 22% share of the important TV advertising market against Dentsu’s 37%. Hakuhodo on its own accounted for 16.5%.

Financial details of the deal have not been disclosed. However, the trio have revealed that they plan to set up a new media buying agency next autumn.

The merger may also provide groups from outside Japan with the chance to increase their presence in the country, as all three shops have foreign tie-ups. Hakuhodo has a worldwide joint venture with TBWA Worldwide, Interpublic Group owns 20% of Daiko, and Yomiko has links with Bates Worldwide and Saatchi & Saatchi.

Data sourced from: Financial Times; additional content by WARC staff