The embrace between Publicis Groupe SA (PUB) Chief Executive Officer Maurice Levy and Omnicom Inc. CEO John Wren on a sweltering seventh-floor terrace at Publicis’s headquarters in Paris yesterday was the culmination of a courtship that began six months earlier in frigid Davos, Switzerland.
There, at the World Economic Forum’s annual conference in January, Levy and Wren informally discussed a merger to create the world’s largest advertising agency, according to a person familiar with the situation. A casual conversation both dismissed as fanciful gradually grew more serious over months of top-secret talks, Levy said.
“It was not calculated, it was just an encounter we do socially from time to time” at first, Levy said. “We had another encounter, and in the meantime started to think ‘What was this stupid idea?’ And looking at things, it wasn’t that stupid.”
The negotiations between the two firms and their advisers, Moelis & Co. and Rothschild, were codenamed “Color.” Omnicom (OMC) was “Orange” and Publicis “Purple,” Levy said in Paris yesterday.
Levy, 71, had been seeking a way to cement his legacy by expanding Publicis as he nears retirement, according to people familiar with the matter. While most analysts had seen the New York-based Interpublic Group of Cos. as a more logical merger partner, Levy considered Omnicom a better fit for the French company, one of the people said.
The two men, who will initially serve as co-CEOs, are, like many couples, opposites in some respects. Levy is a garrulous celebrity CEO who is ubiquitous at media industry conferences and in the press. Wren, 61, is more private and rarely grants interviews.
They were nonetheless in sync at yesterday’s press conference, at times finishing each other’s sentences -- Levy, switching between French and English, and Wren fumbling to put on a headset to hear the translations.
Their union, pending regulatory and shareholder approval, will have seismic consequences for the advertising industry. With a combined market value of more than $30 billion, the new Publicis Omnicom Group will supplant WPP Plc (WPP) as the largest advertising company. Its revenue will be about $23 billion.
Levy yesterday likened the deal to a marriage, inviting reporters to enjoy a glass of Champagne on Publicis’s terrace overlooking the Arc de Triomphe. Wren, too, emphasized the momentum of their romance.
“During those six months we had many opportunities to test whether we could trust each other or not,” he said.
The alliance will bring under one roof agencies including Omnicom’s BBDO Worldwide and Publicis’s Leo Burnett and Saatchi & Saatchi, extending their presence in every major market.
The merger will also give the owners more clout to negotiate for their clients better ad rates for media placements on television, the Internet and in print, as the global advertising industry has started to show signs of a recovery.
Levy has spurred growth by acquiring digital advertisers as well as companies in emerging markets such as China. He assumed the CEO role in 1975 from founder Marcel Bleustein-Blanchet, who took Publicis public in 1970. Levy has discussed stepping down in recent years, saying in April after presenting a five-year plan that he was pushing for it. The supervisory board “doesn’t feel the same kind of urgency that I do,” Levy said.
Wren helped found Omnicom in 1986. The company is active in more than 100 countries and generated more than $14 billion in revenue last year through ad outlets including BBDO.
While Publicis and Omnicom said they share a common culture and project efficiencies valued at about $500 million from the combination, competitors were skeptical.
“It’s a deal that makes two people happy and 130,000 and a whole bunch of clients destabilized and concerned,” said David Jones, CEO of rival Havas SA. (HAV) “Clients today want us to be faster, more agile, more nimble and more entrepreneurial not bigger and more bureaucratic and more complex.”
The proposed merger won’t be the first major deal hatched in Davos, where CEOs, bankers, politicians and entertainers gather for meetings, seminars and lavish parties. At the 2011 forum Sanofi moved closer to an eventual $20 billion takeover of Genzyme Inc. Deutsche Boerse AG and NYSE Euronext CEO’s also met there to discuss the German exchange’s attempted takeover of the U.S. market.
For Levy, Davos is especially familiar turf. His company’s events arm, PublicisLive, organizes the conference.
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