European Commission Gives Green Light to Publicis Omnicom Merger

Holding Companies Still Await Approval in China, Colombia

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The European Commission today cleared the way for Publicis Groupe to merge with Omnicom Group, taking the two companies a significant step closer to forming the world's largest communications group.

An EC statement justified the decision. It said, "The merged entity would be sufficiently constrained by several competitors -- including large international advertising groups such as WPP, Dentsu-Aegis, IPG and Havas -- capable of meeting the more comple requirements of large advertisers with global reach. Should the merged entity increase its prices or decrease the quality of its services, customers would have the ability to switch to one of several competing agencies."

With particular reference to media buying, the statement added: "Should the merged entity try to use its position on the market for media buying ... to increase its negotiation power with media owners, the latter would have sufficient countervailing power, as a consequence of the significant degree of concentration of media owners in the relevant European countries."

Publicis Groupe CEO Maurice Levy and Omnicom Group CEO John Wren
Publicis Groupe CEO Maurice Levy and Omnicom Group CEO John Wren Credit: Balint Porneczi/Bloomberg

The new company plans to establish its headquarters in the EU -- in the Netherlands -- if the deal goes ahead as planned in the second quarter of 2014. The official reason given for choosing the Netherlands is the country's "neutrality," but it is also known for offering significant tax advantages.

Publicis and Omnicom are still waiting to hear from Chinese regulators, among others, before the deal can be finalized. Maurice Levy, Publicis Groupe chairman and CEO, told the media on a visit to Mumbai in December that he is anticipating a positive decision from China by mid-January, and from Colombia by the end of January, with other remaining territories to follow soon after.

Canada, India, Turkey, South Africa and South Korea are among the countries that have already approved the merger.

The EC decision was taken relatively quickly -- documents were only submitted in mid-December. Dominic Lyle, director general of the European Communication of Communications Agencies, explained that executives from both groups had been in discussion for months beforehand with the EU to ensure that when the documentation was submitted, it contained everything necessary for a speedy conclusion.

Mr. Levy is thought to have secured the blessing of the government in France, where Publicis Groupe is a dominant player, even before the merger was announced. He said at the press conference in July, "We don't expect that the French government will have anything other than great support."

The EC statement added, "The bidding nature of the markets, the presence of other large competitors, the relatively low barriers to entry, and the significant countervailing power of media vendors will ensure a level playing field in all the affected markets after the merger."

In the U.S., the Federal Trade Commission anti-trust authorities granted approval back in November.

When the deal was first announced in July 2013, Mr. Levy and Omnicom Group CEO John Wren had hoped that it would be finalized by the first quarter of the year. Mr. Wren said at the time, "The process to get the deal through will take a bit of time but our advisors have not flown any red flags."

Mr. Levy and Mr. Wren will run the combined business as joint CEOs for the first 30 months. The new group will combine some of the world's biggest advertising and media brands, including DDB, Saatchi & Saatchi, BBDO, TBWA, Leo Burnett, ZenithOptimedia and Starcom MediaVest.

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