WPP’S status as the world’s largest advertising firm is under threat after two US rivals agreed a multi-billion-pound mega-merger.
New York-based Omnicom and Interpublic, the second and fourth largest ad agencies, have struck a £10billion deal to join forces in a move that will de-throne FTSE 100 member WPP.
The tie-up is likely to spark fears of job losses in the UK as both entities employ thousands of people across their various ad agencies and PR firms across Britain, and are planning to save £585million in costs through the merger.
Globally, Omnicom has over 75,000 staff while Interpublic employs more than 57,000.
Under the terms of the deal, Interpublic shareholders will receive 0.344 Omnicom shares for each share they hold in the business, giving them control of 39.4 per cent of the enlarged group.
Tie-up: Omnicom, led by CEO John Wren (left) and Interpublic, led by CEO Maurice Levy (right), the second and fourth largest ad agencies, have struck a £10bn deal to join forces
Omnicom chief executive John Wren said: ‘Now is the perfect time to bring together our technologies, capabilities, talent and geographic footprints to bring clients superior, data-driven outcomes.’
The merger is expected to attract intense scrutiny from competition regulators given the firm’s potential dominance over the sector.
If it is completed, it will mean WPP will be overtaken in terms of advertising sales for the first time in 16 years.
The London-based firm will be dwarfed by its combined rivals in terms of sales and market capitalisation, with Omnicom valued at £15.8billion while Interpublic is worth £8.5billion compared to WPP’s £9.4billion.
Combined, the two US firms reported revenues of around £20billion last year compared to £14.8billion for WPP.
The deal would also see the world’s ‘Big Four’ ad agencies reduced to three, with WPP competing with the newly merged firm, as well as French giant Publicis Group, which owns ad agency Saatchi & Saatchi.
WPP’s shares have struggled following the departure of its founder and long-serving boss Sir Martin Sorrell in 2018.
But shares rose 2.8 per cent, or 24p, to 891.6p yesterday as investors considered whether the merger could provide opportunities for the group.
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