The Dentsu challenge

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One of Publicis' toughest challenges will be to develop its relationship with Dentsu, which is said to be still smarting after overpaying for its stake in the French network.

Industry insiders say Dentsu is upset over the nearly $1 billion price tag of its 15% stake. The Japanese company paid $498.7 million to increase its stake in Bcom3 prior to the deal closing, in addition to the $494.5 million it had paid for its original Bcom3 stake in 2000.

But the Publicis/Bcom3 deal had no "collars," which would adjust the ratios of the share exchange if stock prices changed-and Publicis stock has dropped sharply since the deal was announced in March.

Publicis shares closed at $16.51 in Paris on Sept. 24, the day the deal closed, far down from $34.14 on March 7, when the deal was announced. Dentsu's nearly $1 billion investment was worth $473.7 million the day the deal closed. Its stake-28.7 million Publicis shares-was worth $657.6 million at Oct. 18's close of $22.92. Dentsu also got voting rights on another 6.83 million shares for the next two years.

Although officials at all three companies denied Dentsu is seeking to renegotiate its agreement, insiders in Japan say Dentsu officials dragged their feet when it came time to close its part of the deal.

"I'm very pleased with the cooperation and the relationship," said Maurice Levy, chairman-CEO of Publicis. The deal has closed and Dentsu and Publicis are discussing future plans, he said.

As Publicis gathers partners to discuss integration, Dentsu holds the high cards-it controls 45% of media-buying activity in the key Japanese market.

contributing: mercedes m. cardona, laurel wentz, kate macarthur and normandy madden

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