WPP is set to steal Omnicom’s position as the world’s largest
advertising group, with estimated revenues of dollars 6.69 billion, as
its acquisition of Young & Rubicam nears completion.
A formal announcement is expected in time for Y&R’s AGM this Friday.
A prompt closure of the transaction is desirable as the value of the
deal, tied to WPP’s share price, has tumbled from a weekend high of
dollars 5.3 billion to dollars 4.5 billion on Wednesday.
Anthony de Larrinaga, an analyst at SG Securities, said: ’If it goes on
too long, pressure increases from the other side (Y&R) to
A factor believed to be delaying the signing is the creation of new
employment contracts for the 49 Y&R executives eligible for big pay-offs
if they left after the merger - a point that led the talks to falter
Y&R’s chief executive, Tom Bell, is likely to stay on in the short term,
though not in the WPP chairman role he had been offered.
The two parties are understood to be informing clients of the takeover
plans. Ford, a major international client for both groups, is thought to
smile on the proposals as the intervention of the car giant last week
caused a proposed merger between Y&R and Publicis to falter.
Ford said it would not accept the Publicis tie-up as the French network
handles the business for the rival car giant Renault.
It has yet to emerge how the takeover will effect the two networks’
media companies. Y&R’s the Media Edge, founded in 1998 has strong
planning credentials but a limited buying function in many markets.
WPP’s MindShare has highly developed planning and buying operations.
A deal would be likely to see the Media Edge’s buying needs handled by
either MindShare or a new, stronger Media Edge with boosted buying
credentials; a move that would hasten the termination of any agreements
between the Media Edge and Media Planning, which has historically
handled substantial amounts of buying for the Media Edge in Europe.
It will be the second time that WPP’s chief executive, Sir Martin
Sorrell, has been at the helm of the world’s largest advertising group:
WPP first took the title in 1989 when it bought Ogilvy & Mather.
The change could trigger a rush of mergers as holding companies fight to
consolidate while there are still relatively small networks available to
buy. Omnicom, which owns the DDB, BBDO and TBWA networks, may choose not
to forgo its number-one status for long.
The Interpublic Group, the third-biggest group in the world, owns only
two networks - Lowe Lintas & Partners and McCann-Erickson - since it
merged Lowe and Lintas last year.
Interpublic’s attempts to acquire the MacManus Group were foiled when
MacManus did a surprise deal with Leo Burnett and Dentsu last year.
True North (which owns the merged FCB and Bozell networks), Saatchi &
Saatchi; Cordiant (which owns Bates and half of Zenith Media), and Grey
Advertising are all players which must either acquire or be
1985: Sorrell leads team that buys Wire and Plastic Products
1987: WPP buys J. Walter Thompson
1989: WPP buys Ogilvy & Mather
1991: Economic slump leads to near-receivership
1997: WPP forms MindShare.