Dentsu reaps benefits of Aegis deal, wins business from rivals

Reuters

BARCELONA, Nov 21 (Reuters) - Japanese advertising groupDentsu is winning global media contracts for the firsttime through its newly-acquired Aegis business and has beentaking work away from rivals Omnicom and Publicis since the two decided to merge.

Tim Andree, executive chairman of Dentsu Aegis Network, saidthe business was growing rapidly since it acquired British mediagroup Aegis, a deal announced in July last year.

Andree, speaking at the Morgan Stanley investor conferencein Barcelona, said there had been no disruption as a result ofthe transaction and the group had managed to maintain itsmomentum.

"We've had some success when you look at our new businessrecord in the past quarter, we've had a high percentage of thatbusiness coming from Publicis Omnicom."

Dentsu paid nearly a 50 percent premium to buy Aegis for 3.2billion pounds in July 2012, in the biggest deal in its history,showing a need to expand outside its home market Japan.

It had earlier been a minority shareholder in French rival Publicis, but sold that stake in early 2012, netting nearly 645million euros.

The Aegis deal made Dentsu the fifth largest ad agencyglobally based on revenues, behind WPP, Omnicom,Publicis, and Interpublic. It is also bigger thanFrance's Havas.

Publicis and Omnicom unveiled their own plans to merge inJuly this year, saying it would give them more financial muscleto cope with technological change and its impact on advertising.

The announcement sparked speculation about whether theremaining large ad groups would need to merge to be able tocompete.

Andree said acquisitions would remain a big part of thegroup's strategy but they would be mostly small to medium deals,of which there were about 50 to 60 in the pipeline.

"You'll see us continue to invest in companies in theemerging markets, the faster growing regions. And we'll continueto invest in digital," he said. "We don't really see anything inthe pipeline of the size and scale of Aegis."

Andree also highlighted the risks of doing mega deals interms of clients. "Anecdotally, clients are not reallyunderstanding the benefits for them. And that's always adangerous position to be in," he said of the Omnicom-Publicistie up.

Martin Sorrell's WPP, currently the world's biggest adgroup, reported results in October that showed how it hadsnapped up new work, which analysts attributed to its twobiggest rivals being distracted by their merger.

Andree said the group had made a big effort to keep bothstaff, including management, and clients on side when it boughtAegis.

"We went out of our way to communicate with the talent andleadership in the agencies that it was business as usual."

Dentsu shares are up roughly 80 percent this year,outperforming a 46 percent rise at WPP, a 43 percent rise forPublicis, and a 42 percent rise for Omnicom.

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