Samsung's Cheil Surges on Prospect of Publicis Stake Purchase

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

Cheil Worldwide Inc., Samsung Group’s advertising agency, surged the most in more than two months on the prospect of Publicis Groupe SA taking a stake in the company.

The French company is weighing a bid for a controlling stake in Cheil, people with knowledge of the matter said this week. Cheil shares rose as much as 9.1 percent in Seoul trading, the most intraday since Oct. 21.

Publicis 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 had a market value of $1.9 billion before today’s trading, 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

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.

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