By Dana Mattioli, Ruth Bender and Suzanne Vranica
Advertising giants Omnicom Group Inc. and Publicis Groupe SA said they have called off their $35 billion merger,
citing "difficulties in completing the transaction within a reasonable timeframe."
The deal billed as a "merger of equals" had been challenged by battles over position and power, including
difficulties in getting tax and other regulatory approvalspeople familiar with the matter have said.
In a joint statement, Publicis Chairman Maurice Lévy and Omnicom CEO John Wren said the "challenges that still
remained to be overcome, in addition to the slow pace of progress, created a level of uncertainty detrimental to the
interests of both groups."
The tie-up, announced with much fanfare in July and originally expected to close by the end of 2013, was designed
to give the companies more heft in competing with deep-pocketed Silicon Valley giants like Google Inc., which have
gotten a leg up on mining data about consumer habits.
The megamerger would have created the world's largest ad holding company by revenue, combining ad agencies such as
BBDO, Saatchi & Saatchi, DDB, Leo Burnett and TBWA as well as public-relations firms including FleishmanHillard and
Ketchum, and digital ad agencies DigitasLBi and Razorfish.
But it was a complex deal from the start. The companies had made clear it was to be a merger of equals, where the
shareholders would each receive about 50% of the equity in the new company--Publicis Omnicom Group--and where the two
CEOs would share the top job for 30 months from the closing.
At the same time, the merger entailed a combination of a French and American company, with the new firm
incorporated in the Netherlands and a U.K. company for tax purposes. Yet the operational headquarters would be split
between France and the U.S.
And technically one company has to acquire the other, for accounting reasons. The two sides hadn't agreed on which
company would be the acquirer of the other, which held up filing of crucial paperwork with the U.S. Securities and
Exchange Commission, said people familiar with the situation.
Delays in obtaining regulatory approvals, particularly in China, also were a factor.
The combined impact of the various delays proved too much for the companies. "We thought we would be through this
in six months and nine months later we still had complex issues that still needed to be resolve, " said Mr. Wren in an
interview Thursday evening. "There was no finish line in sight and that created uncertainty."
At the same time, relations between the two sides had severely frayed, people familiar with the situation have told
The Wall Street Journal. Many of the disagreements stemmed largely from the two CEOs, Messrs. Wren and Lévy, one of
the people familiar with the situation has said. The two sides had butted heads over issues including where the combined
company would be headquartered and which executives would fill top roles.
In particular the companies had been at loggerheads over who would fill the position of finance chief. Differences
over the position were so stark that last November, Omnicom executives told an analyst in the U.S. that its CFO Randy
Weisenburger would get the job while Publicis executives told another analyst its CFO Jean-Michel Etienne would get it,
according to a person familiar with the situation.
Asking about personality clashes and the disagreements over senior roles, Mr. Wren said, "We both have strong
personalities and we both have strong corporate cultures but there was no one factor."
Another issue that complicated the deal, one of the people said, was difficulties the two companies encountered in
agreeing on ways to raise Omnicom's profit margins closer to those of Publicis. For 2013, Publicis posted an operating
margin of 16.5% compared with Omnicom's 12.5%.
Publicis and Omnicom took the decision to call of their merger in mutual agreement, said a person familiar with the
matter. The two sides recently came to realize that there were too many obstacles to overcome, and that at any rate to
do so would take a long time, another of the people familiar said Thursday.
For the sake of their clients, the companies decided that walking away from the deal was the best course, people
familiar with the situation said. Personnel issues alone weren't a deal breaker, this person added.
"It became evident a few weeks ago that we were stuck in a one-way road and that the best thing would be to not go
ahead with the merger," said one of the people.
The companies said no termination fees would be payable by either side.
In recent weeks the companies have given starkly different messages about the status of the merger.
During a quarterly sales call with analysts in mid-April, Mr. Lévy said he thought the deal could close in the
third quarter. A week later, Omnicom's Mr. Wren said that he couldn't predict when the deal would close because of its "
complexity and open issues."
This would be one of the largest announced deals to later be called off.
The deal would have helped solve a succession issue for the French company. Publicis's board in 2010 asked the 72-
year-old Mr. Levy to extend his tenure as CEO, highlighting the struggle for the group to find a successor. He has
headed Publicis for over 30 years.
Mr. Lévy has worked for years to move Publicis to the top ranks of the global ad business. Publicis executives
suspected that if the Omnicom deal didn't go through, Mr. Lévy would continue his efforts to acquire other
marketing and advertising companies, specifically in the digital space where he has been most aggressive. One possible
target would be Interpublic Group of Cos., the fourth-largest ad company by revenue, which Mr. Lévy has had
conversations with over the years. An IPG spokesman declined to comment.
Unlike Publicis, Omnicom hasn't been as active acquiring digital companies but has focused more on building digital
capabilities internally. The company is likely to continue down this path and put greater emphasis on its Big Data
In the interview, Mr. Wren said, "We are very bullish tonight about 2014 and where we are going."
Still, both companies did cite that they needed this deal to better compete with Silicon Valley companies like
Google. But the lack of a deal is likely to raise questions from investors as well as the industry about their "Plan B"
Dana Cimilluca and Nathalie Tadena contributed to this article.
Write to Dana Mattioli at email@example.com, Ruth Bender at Ruth.Bender@wsj.com and Suzanne Vranica at
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