(Dec 9): Omnicom Group has struck a US$13.25 billion (RM58.62 billion) all-stock deal to buy rival Interpublic Group, creating the world's largest advertising agency as traditional players look to better compete with Big Tech firms amid accelerating use of AI.
The deal, announced on Monday, is expected to attract regulatory scrutiny as it seeks to merge the world's third-largest ad buyer, Omnicom, with the fourth-largest — Interpublic. Both companies are based in New York.
Interpublic shareholders will receive 0.344 Omnicom shares for each share held, or US$35.58 based on Omnicom's last close. This represents a premium of 21.6% to Interpublic's close on Friday.
Interpublic's shares, down more than 10% year to date, were up nearly 15% in premarket trading. Omnicom fell 4%.
The combined company would have revenue of more than US$25 billion, based on 2023 figures. It would compete with the UK's WPP and France's Publicis Groupe SA, which generated annual revenue of £14.85 billion (US$18.97 billion or RM83.97 billion) and €13.10 billion (US$13.86 billion or RM61.30 billion), respectively.
Omnicom, valued at US$20.2 billion, owns brands such as BBDO and TBWA, while Interpublic owns McCann, Weber Shandwick, and Mediabrands, among others.
Tech giants such as Alphabet-owned Google and Amazon.com have in recent years attracted marketing dollars away from traditional agencies by offering both advertising tools and marketplaces to buy and sell them.
Soaring use of AI tools that allow businesses to create ads cheaper and faster has also squeezed traditional agencies, forcing them to scramble to develop similar in-house tools to retain clients.
With more tech-driven solutions coming into the market, MoffettNathanson analyst Michael Nathanson said he was concerned the underlying value proposition of an ad agency's offering would remain pressured.
"An integration of this size would be unprecedented and likely challenging. The winners in this kind of transaction could end up being the newco's biggest rivals who would use the deal to try to steal clients and talent," Nathanson said.
Regulatory roadblocks had forced Omnicom and Publicis to call off their US$35 billion merger, which would have created the world's biggest advertising group, in 2013.
Meanwhile, Publicis' early investments in data and AI technology have helped it weather the changes in the industry better than rivals.
Omnicom shareholders will own 60.6% of the combined company and Interpublic investors the rest. The deal is expected to close in the second half of 2025 and generate annual cost savings of US$750 million.
John Wren will remain Omnicom's chairman and CEO, while Interpublic boss Philippe Krakowsky will serve as co-chief operating officer along with Daryl Simm.
PJT Partners is the financial adviser to Omnicom and Morgan Stanley to Interpublic.
The Wall Street Journal first reported on the Omnicom-Interpublic deal talks.
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