Publicis buys Saatchi & Saatchi for $ 1.89 bn

The new company, to be named Publicis Groupe SA, would have revenues of 2.1 million euros and a market capitalisation of $6.3 billion. It would be listed in New York, the two firms said in a joint statement. "The supervisory board of Publicis and the board of directors of Saatchi & Saatchi have approved an agreement giving Publicis 100 per cent of the capital of Saatchi & Saatchi, the world’s 12th advertising company," the statement said.

The deal represents a 19 per cent premium over Monday’s closing price of 421P. The deal, which will give Saatchi & Saatchi shareholders 30 per cent of the newly-merged company, values Publicis at 480 euros a share, the statement said.

Publicis would issue some 4.1 million new shares to complete the transaction, due to take effect in mid-September, it said. The deal allowed for parity adjustments to account for changes in Publicis’ share price and the value of the euro against the dollar between now and mid-September, meaning the exact number of shares issued could vary between 3.4 and 4.5 million.

The planned takeover comes just a little over a month after Publicis lost out to British rival WPP in efforts to buy US Group Young & Rubican. A combination of Saatchi and Publicis will create a group which had annualised revenues over $9.55 billion last year.

A takeover of Saatchi, which has produced adverts for cars, washing powder and former British Prime Minister Margaret Thatcher, will not surprise many pundits. A wave of consolidation in the sector has seen the emergence of some big players with a battery of marketing and creative talent at groups like WPP/Young Rubican, Omnicom, Interpublic, France’s Havas Advertising and Japan’s Dentsu.

"It really isn’t a surprise to see this sort of announcement — we have been touting this sort of story around for a number of months now. The mid-sized agencies are finding it increasingly difficult to compete in the global market," said analyst Paul Richards of WestLB Panmure.

A deal with Saatchi will bolster Publicis’ ambitions to go global. In 1998 the French group bought San Francisco’s Hal Riney & Partners and Evans Group and in 1999 it bought a 49 percent stake in Burrell Communications Group.

Saatchi does nearly half of its business in the US market, which contributed nearly 70 per cent of its operating profits in 1999. In terms of clients, Saatchi’s strengths are in positioning brands for makers of fast-moving consumer goods (FMCG) and automobiles. Procter & Gamble and Toyota are its two biggest clients, accounting for nearly 35 per cent of its group sales. Its other main clients are DuPont and General Mills.

Saatchi has moved recently into some fast-growing sectors like healthcare, which accounted for 14 percent of its 1999/2000 sales, as well as games software and DOT-com companies. Saatchi’s other activities include its public relations business Rowland Worldwide, Facilities Group in which it owns 70 percent and media buying firm Zenith Media in which it owns 50 per cent.

The agency traces its roots back to Natham Saatchi, a prosperous Jewish merchant who emigrated from Iraq to London in 1947 and opened a consultancy in 1967. Sons Maurice and Charles carried the torch to create one of the world’s most flamboyant advertising firms. But too many acquisitions, leading to client conflict, eventually saw both brothers leaving the company in 1995. They now run separate firm M&C Saatchi.