Analyst: Ad companies benefit from big merger

Barclays analysts say ad companies will benefit from Omnicom, Publicis agreement to combine

Associated Press

NEW YORK (AP) -- Shares of advertising companies rose Monday, after two of ad rivals announced their intention to combine to create the world's largest agency.

On Sunday, Omnicom Group Inc., based in New York, and Publicis Group SA, based in Paris, said they agreed to combine in a deal worth more than $35 billion. The deal still has to be approved by regulatory agencies in the U.S. and Europe.

The deal would create the world's largest advertising firm.

But rather than being a bad thing for its rivals, other ad agencies could benefit, said Barclays analysts Julien Roch and Anthony DiClemente in a note to investors. Other large advertising holding companies include Interpublic Group of Cos. in New York, WPP in London and Havas in Paris.

The analysts said the combined company is likely to lose some clients, since the ad companies work on competing brands. If they combined, there will end up being some potential conflicts of interest. Under the deal, rivals such as Coca-Cola Co. and PepsiCo Inc., McDonald's Corp., Yum Brands Inc.'s Taco Bell, Johnson & Johnson and Procter & Gamble would find themselves under the same umbrella.

"If anything, the merger provides an opportunity for advertisers to review their agencies in order to get a better deal, and we wouldn't expect the new Publicis Omnicom Group to win all the reviews," he said. "This should benefit Havas, Interpublic and WPP unless they decide to engage in a merger of their own."

IPG shares rose 73 cents, or 4.6 percent, to $16.60 in afternoon trading, closer to the high end of the stock's 52-week range of $16.41 to $17.42. WPP shares rose 7 pence to 11.8 pounds on the London Stock Exchange. Havas shares rose 25 euro cents to 5.66 euros on the Paris Stock Exchange.

Meanwhile, Omnicom Group's shares rose 27 cents to $65.38 in New York while Publicis shares rose 5 euro cents to 59.40 on the Paris Stock Exchange.

View Comments (0)