(Bloomberg) -- Omnicom Group Inc. has agreed to buy Interpublic Group in a deal that will create the world’s largest advertising company.
Under the terms of the deal announced Monday, Interpublic shareholders will receive 0.344 Omnicom shares for each share of Interpublic common stock they own. Based on Omnicom’s closing share price Friday of $103.42, that values the deal at $35.58 a share, or $13.3 billion excluding debt, according to Bloomberg calculations. The final price will be based on Omnicom’s share price at the time of the deal’s closing, which the companies expect to occur in the second half of 2025.
The deal will create a company with combined annual revenue of more than $25.6 billion, the companies said. That would be comfortably above the roughly £14.9 billion ($18.9 billion) generated last year by London-based WPP Plc, currently the market leader.
The move combines the New York-based agencies behind some of the most iconic ad campaigns over the past decades — from “Got Milk” to Apple Inc.’s “Think Different” — under one roof, after years of consolidation on Madison Avenue. The two companies are half of the “Big Four” global ad agencies, which also include WPP and France’s Publicis Groupe SA.
In recent years the industry has been transformed by the digitalization of ad channels and as Alphabet Inc.’s Google, Meta Platforms Inc. and other Silicon Valley players encroached on their space. Now, the advent of generative artificial intelligence is expected to replace much of the creative work agencies provide.
A merger of the “two fierce competitors” is an indication that the ad agencies need to cut costs and reduce capacity, analysts at MoffettNathanson wrote in a report on Sunday after the Wall Street Journal broke news of the pending merger. “It feels like we are on the precipice of significant secular changes,” the analysts wrote in the note.
Led by Chief Executive Officer John Wren, Omnicom serves more than 5,000 clients in over 70 countries, according to its website. Its network of agencies includes BBDO, DDB and TBWA and its corporate clients include AT&T Corp. McDonald’s Corp. and Unilever Plc. Interpublic is run by CEO Philippe Krakowsky and is home to agencies such as McCann Worldgroup and Weber Shandwick and corporate clients from L’Oreal SA to Johnson & Johnson.
The tie-up also comes a decade after Omnicom abandoned an attempt to become the world’s biggest ad agency via a $35 billion merger with Publicis. That deal was scrapped in 2014 after disagreement over how a combined company would be run. Regulatory hurdles also played a part. This time, however, the company expects it won’t face much antitrust scrutiny.
“The world isn’t divided to four companies,” Chief Financial Officer Philip Angelastro said on a call with analysts. “You have Google, Facebook, Amazon — many other people who are participating at one level or another in servicing people’s marketing needs. This allows us to take control of our own future rather than let technology take over in ways we can’t anticipate today.”
Angelastro said there’s also reason to believe that the change in administration in the US and the attitude toward business will “make it more friendly, especially when you have the compelling story that we have.”
Analysts at Madison & Wall consultancy said “there is tremendous industrial logic to two large agency groups combining.” In addition to the perceived business-friendly incoming administration, ad agencies now are in general smaller proportionally. Large firms have collectively lost share to smaller ones in the US as they pruned their portfolios, according to Madison & Wall.
Wren will remain chairman & CEO of Omnicom and Krakowsky will join as co-president and join the company’s board, according to the statement. At closing, Omnicom shareholders will own 60.6% of the combined company. The transaction is expected to generate annual cost synergies of $750 million, according to the companies.
Interpublic shares have fallen about 10% this year. The stock closed at $29.26 in New York on Friday, giving the company a market value of $10.9 billion. Its shares rose 11% on Monday after news of the deal. Omnicom stock was up 20% in 2024 through Friday for a market value of roughly $20.2 billion. The stock fell 7.4% on Monday.
(Updates with executive comments and analyst comments)
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