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Omnicom Adjusts Conversion Rate of Notes

Zacks Equity Research

Omnicom Group Inc.(OMC) recently announced that it has modified the conversion rate of its Zero Coupon Zero Yield Convertible Notes due 2032. The company’s wholly-owned direct finance subsidiary, Omnicom Capital Inc., declared that with effect from Sep 24, 2013, the new conversion rate is 18.249 shares of the parent company’s common stock per $1,000 principal amount of Notes. Formerly, the conversion rate was 18.18 shares of Omnicom per $1,000 principal amount of Notes.

A few months back, the company had announced that the notes due 2032 will have contingent interest for the six-month period beginning Aug 1, 2013. The Contingent cash interest is payable on Oct 31, 2013 and Jan 31, 2014 at the rate of $2.81 per $1,000 principal amount of Notes. The record dates of the notes are Oct 15, 2013 and Jan 15, 2014, respectively.

Omnicom has been in the limelight for quite sometime. Yesterday, it announced a merger with InComm Brodeur for an undisclosed amount. The target firm will merge with Omnicom and will be renamed immediately as Ketchum. This ‘market-extension merger’ is expected to benefit both the companies. The move is a strategic fit, as it will extend the reach of Ketchum – a division of Omnicom – to the South Korean market ahead of the 2018 Olympics.

Moreover, a few months back, Omnicom and Publicis Groupe SA (PUBGY) 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.

Omnicom is an advertising, marketing and corporate communications bellwether. The company 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 to control expenses and its global reputation are commendable.

Omnicom currently has a Zacks Rank #4 (Sell). Better-placed stocks in the same sector worth considering include WPP plc (WPPGY) and MDC Partners Inc. (MDCA). While WPP carries a Zacks Rank #2 (Buy), MDC Partners has a Zacks Rank #1 (Strong Buy).

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