Costs pile up as Publicis, Omnicom tensions continue

The proposed merger between Publicis Groupe and Omnicom Group is costing the holding companies millions in fees, as the $35 billion deal is delayed by tax rulings and plagued by rumors of infighting.

PARIS: The proposed merger between Publicis Groupe and Omnicom Group is costing the holding companies millions in fees, as the $35 billion deal is delayed by tax rulings and plagued by rumors of infighting.

The umbrella groups said they could not put a date on the merger’s completion, which would create the world’s largest marketing services company.  When it was revealed last July, they expected to finish the combination by the first quarter of 2014.

Omnicom spent $7 million on professional fees related to the deal in the first quarter of this year, according to its Q1 financial report.

The groups’ share prices have also tumbled since tensions over the deal emerged at the end of February. Publicis shares fell from €69.06 on February 25 to €60.27 on Tuesday. In the same period, Omnicom’s share price dropped $10 to $66.69.

"There is also the cost of the distraction to management time," said Marcus Anselm, a partner at the corporate finance advisory firm Clarity. "They will have hundreds of very senior people focusing on the deal who could be focusing on strategy and growth."

The UK’s tax authority has placed conditions on whether the merged company can be registered for tax purposes in the country. A spokesman said it was vigilant over "aggressive" tax planning and international tax reform.

Omnicom president and CEO John Wren said last week that the UK tax hold-up was "unexpected."

Tax rulings are also pending in the Netherlands, where the new company would be legally based, and France. China represents the final hurdle for competition laws.
Both companies will form 50% of the new group, but one has to acquire the other for accounting reasons.

Sources said there has been infighting over senior roles, especially the CFO position, which could go to Omnicom’s Randall Weisenburger or Publicis’ Jean-Michel Etienne.

This story originally appeared on the website of Campaign.                                

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