Publicis Said to Weigh Bid for Control of Samsung Ad Agency

  • French company mulls tender offer for 30% of Cheil Worldwide
  • Deal would probably see Samsung Group keep significant holding

Publicis Groupe SA is weighing a bid for a controlling stake in Samsung Group’s advertising agency Cheil Worldwide Inc., people with knowledge of the matter said.

The French company is considering a tender offer for about a 30 percent stake in Seoul-based Cheil Worldwide, which would make it the single largest shareholder, one of the people said. Any deal would probably see Samsung Group keep a significant holding in Cheil Worldwide, which has a market value of $1.9 billion, the person said, asking not to be identified as the information is private.

Publicis, which owns ad agencies including Leo Burnett and Saatchi & Saatchi, has struggled since a merger with Omnicom Group Inc. unraveled in May 2014. Last month, it lost most of the North American media business for Procter & Gamble Co., the world’s largest advertiser, as well as L’Oreal SA’s North American media planning and buying.

“Publicis has been distracted with acquisitions, while the main issue for them is defending and winning accounts,” Alex Wisch, an analyst with Bloomberg Intelligence, said by phone Wednesday. “It’s not the right timing or strategy at this stage.”

Consolidation Push

Shares of Publicis were little changed at 11:49 a.m. Wednesday in Paris. The benchmark CAC 40 index rose 1.7 percent.

The French company wants to structure the potential transaction to ensure Cheil Worldwide continues handling Samsung Group advertising, according to the people. Samsung Electronics Co., the maker of Galaxy smartphones, spent 2.73 trillion won ($2.3 billion) on advertising globally in the nine months through September 2015, according to a regulatory filing, which didn’t specify which agencies the expenditure benefited.

The deliberations are at an early stage, and Paris-based Publicis may decide against making an offer, the people said.

Cementing Control

Samsung Electronics and engineering affiliate Samsung C&T Corp. own about 25 percent of Cheil Worldwide, according to data compiled by Bloomberg. Representatives for Publicis and Samsung Group declined to comment, while a spokeswoman for Cheil Worldwide said she’s not aware of the issue.

In September, Samsung Group completed a merger of its de-facto holding company Cheil Industries Inc. and Samsung C&T, with the merged entity keeping the Samsung C&T name. The deal helped the founding Lee family cement control by allowing the group to strengthen its cross-ownership structure since the merged affiliates had stakes in other companies.

Publicis unveiled a new management structure in December designed to drive revenue. That followed the company’s decision to cut its full-year sales forecast in October, saying it recorded no growth the month before as clients canceled and postponed campaigns.

Before it's here, it's on the Bloomberg Terminal.