Omnicom-Publicis Merger: No.1 Ad Firm?

Omnicom Group Inc. (OMC) and Publicis Groupe SA (PUBGY) have signed a definitive agreement to merge together to create Publicis Omnicom Group – arguably the world’s biggest communications, advertising, marketing and digital services company. With combined 2012 revenues of $22.7 billion and an equity market capitalization of approximately $35.1 billion, the transaction is a merger of equals and is expected to close in the fourth quarter of 2013 or the first quarter of 2014.

Every shareholder of both the companies will hold about 50% of Publicis Omnicom Group’s equity. Publicis Groupe shareholders will receive one newly-issued share of the agency for each Pubicis share they own with a special dividend of €1.00 per share. Omnicom shareholders will get 0.813 newly-issued shares with a special dividend of $2 per share.

This merger brings together iconic agency brands that will offer clients the industry’s leading talent across geographies. With over 130,000 employees, the new group will be well positioned to serve clients and help them better to build their brands and grow their businesses.

The communication and marketing landscape has been through a roller-coaster ride in the past and this merger is likely to reopen new avenues for growth and success for the individual companies. This merger will enable the agencies to make best use of their skilled workforce, diverse product offerings, and enhanced global footprint to leverage a list of global and local clients and reap synergistic benefits. The combined agency is expected to generate efficiencies of $500 million in future. Maurice Lévy and John Wren, the CEOs of Publicis Groupe and Omnicom, respectively, will be the co-CEOs for the new entity for an initial period of 30 months, following which Lévy will become non-executive Chairman and Wren will continue as the CEO.

Omnicom is one of the largest advertising, marketing and corporate communications companies in the world. Omnicom has a strong track record of winning new clients and receiving additional deals from the existing ones. The company’s business mix is well-diversified geographically and benefits largely from the growing markets. In addition, the company’s efforts in maintaining controlled expenses and strong global reputation are commendable.

Omnicom currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look are Clear Channel Outdoor Holdings Inc (CCO) and Harte-Hanks Inc. (HHS), both carrying a Zacks Rank #2 (Buy).

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