Publicis: share price benefits from Omnicom/Interpublic merger

(CercleFinance.com) - Publicis shares posted one of the biggest gains on the CAC 40 index on Monday on the Paris Bourse, in response to the announcement of the merger between its two main American competitors, Omnicom and Interpublic.


At around 4:00 pm, the share price was up by more than 2.5%, bringing its gains since January 1 to almost 27%, one of the best performances on the CAC this year.

Omnicom, the US leader in advertising, announced this morning that it had reached an agreement to acquire its competitor Interpublic in an all-stock transaction.

Under the terms of the public exchange offer (PEO), Interpublic shareholders will receive 0.344 shares of common stock for each share held.

The combination - expected to generate annual cost synergies of $750 million - will create a group with over 100.000 employees in fields ranging from advertising and marketing to public relations, customer experience and data analysis.

With the acquisition of Interpublic, Omnicom will increase its annual sales to $25.6 billion.

By way of comparison, the annual sales of the UK's WPP, another of the 'Big Six' players in advertising, are close to $19 billion, while those of France's Publicis stand at around $16 billion.

In a reaction note, analysts at Oddo BHF refer to a 'positive transaction for the entire industry, but 'especially for competitors'.

'This reduction in competition would naturally be positive for this industry, with the ability to raise prices and less competition on recruitment', explains the private bank.

Oddo's teams also point out that there is an execution risk associated with the deal, pointing out that Omnicom has never demonstrated its ability to manage major operations, as demonstrated by the failure of its planned marriage with Publicis in 214.

The new group will have to manage the risk of losing clients and talent, which could benefit its competitors, particularly Publicis, which is the group with the greatest exposure to the US", adds Oddo.

On the New York Stock Exchange, Omnicom shares were down by almost 7% in early trading on Monday, while Interpublic shares were up by almost 10%.

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