The split, rumored for weeks in the European investment community, is expected to send the two scrambling for other partners.
Publicis owns 20.3% of True North, which in turn owns 20.8% of Publicis Communication. The two companies have a joint venture in Europe called Publicis FCB Europe, owned 51% by Publicis Communication and 49% by Chicago-based True North.
"FCB's unilateral decisions followed differences which had developed over many months and which are currently the subject of arbitration concerning the role, scope and functioning of the international alliance," Publicis said in a statement. The company said it wants to keep working with True North "on a new basis" and that joint operations will not be affected "in the foreseeable future."
According to an FCB filing with the Securities & Exchange Commission, the companies began arbitration last September over "certain business acquisitions and transactions." Specifically, insiders say, FCB was rankled over Publicis' acquisition of Groupe FCA.
In an effort to gain control of the situation, Chicago-based True North, formed in December, now is likely to assert that Publicis has twice breached the alliance. "We are moving to intensify our efforts ... to take control of the FCB/Publicis alliance," a True North spokesman said.
True North has talked in the past with a number of U.S. shops, including Chiat/Day, Fallon McElligott and Wieden & Kennedy. But an irrevocable split with Publicis would put pressure on True North Chairman-CEO Bruce Mason, who has been looking to build networks, to first seek an agency with international scope.
Even before the Publicis rift, True North was looking elsewhere. The company and Tokyo's Dentsu top the list of agencies said to be interested in acquiring Bozell Worldwide.
Bozell's revenue last year was $271 million and is expected to increase as much as 29% for the fiscal year ending March 31. If sold, the agency likely would fetch more than $200 million.
Bozell President-CEO Chuck Peebler would only say "with the changes going on in the industry and in the interest of client needs and the stockholders, you have to talk with everyone. But we're not seeking anything."
True North "has been all over Bozell," one industry executive said, noting negotiations at the end of 1993 resulted in an "insultingly low offer." "Bozell said `Forget it,'*" the executive said.
Rumors that Bozell will more formally affiliate with Dentsu also are circulating. "We have no definite plans to affiliate with Bozell," said a Dentsu spokesman.M
Contributing to this story: Laurel Wentz, Jeanne Whalen and Ivy Silverman.