London/New York/Paris May 9 (Reuters): The proposed $35-billion merger between US-based Omnicom Group Inc and France’s Publicis Groupe SA has been called off as the obstacles to moulding the two rivals into the world’s largest advertising agency proved too much.
The deal, heralded in July as a merger of equals that would enable the two agencies to compete more effectively in the digital arena, foundered on issues ranging from its complex tax structure to the firms’ divergent cultures. The two sides were also losing major clients — more than $1.5 billion in the past month alone — and did not want to let the uncertainty continue.
“There was no one factor,” Omnicom chief executive John Wren, 61, said.
“There are a lot of complex issues we haven’t resolved. There are strong corporate cultures in both companies that delayed us for reaching an agreement. There was no clear finish line in sight, and uncertainty is never a good thing when you are in the personal service business.”
Publicis CEO Maurice Levy said a power struggle between the partners, including over who would serve as chief financial officer, also played a role in the breakdown.
“I was very attached to the concept of equality and was not ready to cede on this point,” said Levy.
“Omnicom wanted their people to fill the CEO, CFO and general counsel jobs. I thought that went too far. I thought Publicis needed to fill the CFO job to preserve the equilibrium and ensure that our business model continued.”
The choice of CFO would have influenced whether the new company inclined towards a centralised structure to manage costs, which Publicis argues has driven its higher margins, or Omnicom’s more devolved approach to subsidiaries.
Neither company will pay a termination fee and they will split the costs of the failed deal, such as legal fees.
Publicis shares were up 1.25 per cent, reflecting relief that the uncertainty was in the past and an acrimonious marriage was avoided.