Barry Krause to Lead New Office; Sizeable Layoff Still Expected

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CHICAGO ( -- As Publicis Groupe nears completion of its acquisition of Bcom3 Group, the U.S. operation of the French agency holding company today said it would consolidate its Chicago and New York operations into its 4 Herald Square office in New York by Oct. 3.

Months of speculation
Speculation has swirled for months in Chicago about whether the Publicis unit here would close. Publicis in Mid America, Dallas, is unaffected.

"This strategic initiative will allow us to make a bigger contribution to our clients' success by providing expanded resources and a broader range of communications expertise under one roof," Robert H. Bloom, chairman-CEO of Publicis in the U.S., said in a statement.

The agency plans to

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close Nov. 15 but maintain a transition staff through year-end. Barry Krause, chairman-CEO of Publicis in Mid America, Chicago, said the agency "would do everything in [its] power" to create as smooth a transition possible for any staff members who will lose their jobs. Next week, staff will meet with the agency's chief administration officer to discuss their retention or separation package.

'A good portion on the street'
The total number of those who will lose their job is unclear. "We're looking to bring a big portion of the staff with us," said Mr. Krause. "Are we still expecting to put a good portion on the street? Yes. This is my chance to build an A level agency. It's about quality, not quantity."

Mr. Krause will head the merged units as chairman-CEO of Publicis, New York. He replaces Doug McMahon, who will leave the agency after a brief transition period. Peter Nicholson, chief creative officer of the Chicago office, will take over as chief creative officer in New York, replacing Lance Paull, executive creative director, who will "pursue other opportunities," the agency said.

Rounding out the reconfigured management team, Terrie Paladino, executive vice president and chief development officer of Publicis in the U.S., will add duties as general manager of Publicis in New York. About 90% of the senior management team agreed to move to the New York unit the week of Oct. 7, said a spokeswoman.

Beachhead operations
Mr. Krause said the impetus to build New York grew out of a discussion two years ago with Publicis Groupe's chairman, Maurice Levy, about expanding Chicago. Mr. Krause said the only viable option to gain a leadership position in Chicago was to buy Leo Burnett. Once Publicis Groupe agreed to acquire Burnett parent Bcom3, Mr. Krause said they decided they needed "beachhead operations" in key markets.

"The ultimate decision to not compete with Burnett but build the New York operation was a fairly recent decision," Mr. Krause said. "We've got a formidable agency force in Chicago [in Burnett]. Rather than compete with it, we decided to build a mothership in the epicenter of New York. The real goal was to create a powerhouse [for Publicis]." He finalized the deal in Paris over the Labor Day weekend.

Clients approve move
All but one of the shop's far-flung clients, a local co-op for Doctor's Associates-owned Subway Restaurants, has approved the move. For Subway, Mr. Krause said the agency would retain a five- to 10-person field unit in Chicago, depending on the client's decision.

Other clients include Novartis/CIBA Vision, American Trans Air, Principal Financial Group, OfficeMax, Char-Broil, and Del Webb and Whirlpool.

Shareholder vote
The move comes as Bcom3 shareholders prepare to tally their final vote Sept. 20 approving the holding company's acquisition by Publicis. While layoffs and unit consolidations have been widely expected on either side of the merger, moves within the Bcom3 units cannot happen until after the deal closes.

The combined operation will have more than 300 employees and annual billings of $400 million. After it completes its acquisition of Bcom3, Publicis will be the fourth-largest advertising holding company with worldwide revenues of roughly $4 billion.

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