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Worldwide revenue at Omnicom Group increased to $3.4 billion in the first quarter of 2014, up 3% from the equivalent quarter last year, the company said Tuesday morning. U.S. revenue increased 4% to $1.86 billion, while international was up 1.9% to $1.63 billion.
But net income for the first quarter of the year was $205.5 million, essentially unchanged from $205.1 million during the first quarter last year, according to Omnicom, which owns ad agencies including TBWA/Chiat/Day, BBDO, OMD, Fleishman-Hillard and Ketchum. Net income was affected by $7 million in pre-tax charges related to the company's proposed merger with Publicis Groupe, which will create the world's largest agency holding company.
Organic revenue, which excludes the effects of events such as acquisitions and disposals, increased 4.3% worldwide, growing 4.8% in North America, 2.3% in Europe, 5.7% in Asia Pacific, 7.4% in Latin America and 6.6% in Africa and the Middle East.
Organic revenue also increased in each of Omnicom's major disciplines, with specialty communications up 5.2%, advertising up 4.9%, customer relationship marketing up 4.2% and public relations up 1.2%.
Omnicom's planned merger with Publicis, which was announced last summer, is taking longer than anticipated. After initially saying the deal could close as soon as the end of 2013, Publicis Chairman-CEO Maurice Levy said last week that he now expected to complete the merger late in the third quarter. Today, Omnicom CEO John Wren wasn't willing to make a prediction.
"The transaction is moving slower than originally anticipated," Mr. Wren said. "Given the proposed merger complexity and open issues, at this point it's not practical to predict when the merger will close," he added later in the call. He said there were three approval tracks still outstanding.
First, there's antitrust approval needed from China. The holding companies have received clearance in the U.S. and E.U., along with 12 other countries around the world, leaving China as the only market remaining. On April 17, the companies entered phase three of a 60-day process that's set to end June 16. If they don't receive antitrust approval from China by that time, the companies will need to resubmit the filings, said Mr. Wren. He cited Dentsu's acquisition of Aegis as an example of the length of the process. "I believe Aegis was in phase three for 43-45 days or something along those lines."
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Second, the companies must settle "complex" tax agreements, specifically in France, where regulators must decide whether to treat the merger as a taxable event for shareholders. "If we cannot obtain these agreements, it could affect the likelihood of satisfaction of the conditions to closing of our deal," Mr. Wren said.
Finally, the companies need to complete filings with the U.S. Securities and Exchange Commission and the Authority for the Financial Markets in the Netherlands, where the merged entity will be based. "The financial-statement preparations and other disclosures are in the process," Mr. Wren said.
New business did not hit its standard $1 billion target in the quarter due to the Vodafone loss, according to Omnicom's chief financial officer, Randall Weisenburger. WPP's MEC won the business this month.
Europe is steadily improving. For the first time since Q1 of 2012, "we've seen positive organic growth in this region," said Mr. Wren. Among larger regions, Germany was positive for the quarter while France continued to be negative.