Publicis/Bcom3 merger: Levy leverages Dentsu ties

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Publicis Groupe's alliance with Dentsu will pay off this week when the Japanese agency absorbs up to $100 million in business in its home country from Publicis client Hewlett-Packard Co.

Maurice Levy, chairman-CEO of Publicis, is moving fast to develop the Dentsu relationship, with plans for a sports-marketing joint venture in Europe. He's also seeking ways to tap into Dentsu's considerable media buying clout in Japan. In a presentation to analysts Oct. 25, Mr. Levy said an unnamed international Publicis client will sign a major new contract worth up to $100 million with Dentsu in Japan, to be announced this week. The client was identified to 120 senior executives at a meeting in Paris the prior day as Hewlett-Packard, several executives present confirmed.

"Japan has always been a problem for them," said an agency executive familiar with the Hewlett-Packard account.

Hewlett-Packard already works with the Publicis Worldwide agency network, and media buying is handled by Zenith Optimedia Group, owned 75% by Publicis and 25% by Cordiant Communications Group. Mr. Levy has been adept at moving business from the world's second largest computer company around the group, helping Publicis & Hal Riney, San Francisco, win product advertising and other HP business. Rival Goodby Silverstein & Partners, San Francisco, part of Omnicom Group, is lead agency for global brand advertising.

Meeting attendees were shown a video of a Publicis account executive sent to Tokyo putting together a team that includes Americans, European and Japanese. The video was used to show how Publicis and Dentsu, which owns a 14.6% stake in the French holding company, will work together, an agency executive said.

In his talk to analysts, Mr. Levy described other initiatives. "Dentsu has extraordinary power and knowledge in sports marketing," he said. "We are thinking how best we can set up jointly a unit [in Europe]."

asian gains

By the end of this year, Publicis agencies should gain more business in Japan and Asia, and pick up new accounts from Japanese advertisers in Europe and North America, he said. He said joint ventures with Dentsu in Europe are planned for 2003, along with a media-buying venture in Japan for Publicis clients to leverage "Dentsu's tremendous economies of scale in media buying."

Analysts were critical of the $60 million savings previously projected by Mr. Levy as a result of the Bcom3 Group acquisition, saying the figure should be higher after closing D'Arcy Masius Benton & Bowles. Mr. Levy said the $60 million is a "minimum" that will likely be surpassed for "a nice surprise" when future cost savings are announced.

He said Publicis will close Bcom3's head offices in New York and Chicago by March 2003 and shut the New York office of D'Arcy to merge with Publicis. D'Arcy offices in Europe and some other markets will merge with Leo Burnett.

country by country

An ongoing country-by-country review and client consultations will determine whether back-office resources can be pooled into multi-agency offices in 20 or 30 emerging markets.

Mr. Levy said some areas may perform better than anticipated, such as health-care marketing, where $300 million in revenue from five separate divisions will be grouped under Publicis Healthcare.

Mr. Levy stood by his forecast of a 15% profit margin this year, despite the weak global ad market. But he said he would have more information when Publicis announces third-quarter financial results Nov. 12. He also emphasized he hopes for zero client fallout from the closure of D'Arcy.

At the meeting for Publicis agency executives, President-Chief Operating Officer Roger Haupt's presentation on Bcom3 Group was privately criticized by some attendees because he did not acknowledge D'Arcy and its contributions.

But the gathering ended on a humorous note, with a joke. Mentioning a papal Mass, handled by Publicis and attended by 1 million followers , Mr. Levy said, "Publicis did everything; the only thing the Pope didn't want Publicis to do was the Mass itself. ... 'Levy,' the Pope said, shaking his head. `It just doesn't seem right'."

contributing: lisa sanders and alice z. cuneo

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