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Omnicom Arm Buys into South Africa

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TBWASouth Africa, the South African counterpart of advertising major Omnicom Group Inc.’s (OMC) operating unit TBWA, recently acquired about 80% ownership stake in Johannesburg-based HDI Youth Marketeers for an undisclosed amount. The remaining 20% ownership stake will continue to be with the erstwhile management team of HDI Youth.

Founded in 1996, HDI Youth is a dedicated youth marketing consultancy that connects diversified brands to people aged 3 to 23. Independent studies by HDI Youth have revealed that half of South Africa’s 50 million people are aged under 23 and account for an annual direct spend of over R105 billion. Consequently, in order to tap such a huge market and reach to newer heights, it has agreed to form an integral part of TBWASouth Africa.

On the other hand, with revenues of R30 million and R50 million a year, and a strong client base of leading companies such as The Procter & Gamble Company (PG) and Intel Corporation (INTC), HDI Youth is a key addition to TBWASouth Africa. The increasing demand for media services, speedy growth of technologies and massive proliferation of channels are likely to drive TBWASouth Africa’s growth going forward.   

Omnicom, the parent company of TBWASouth Africa, is a leading global marketing and corporate communications company. Omnicom has a 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 growing markets. Additionally, the company is also building upon its digital and analytical capabilities by investing in agencies and partnering with innovative technology companies in key markets.

Recently, Omnicom and Publicis Groupe SA (PUBGY) won European Union regulatory approval for their $35.1 billion merger, which is likely to create the world's biggest advertising agency. This merger is anticipated to create new avenues for growth and success for the individual companies. The ‘merger of equals’ will enable the respective companies to make the best use of their skilled workforce, diverse product offerings and enhanced global footprint to leverage a list of global as well as local clients and reap synergistic benefits.

Omnicom currently has a Zacks Rank #3 (Hold).

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