UPDATE 1-Ad firms Publicis, Omnicom in merger talks - report

Fri Jul 26, 2013 9:18pm EDT

July 26 (Reuters) - Publicis Groupe SA and Omnicom Group Inc are in late-stage merger talks to create what would be the world's largest advertising group, Bloomberg reported, citing a person with knowledge of the matter.

The deal, which the report said is likely to be structured as a merger of equals, would combine Publicis agencies such as Leo Burnett Worldwide and Saatchi & Saatchi with Omnicom's BBDO Worldwide and DDB Worldwide.

If the companies do combine, it would create the world's largest advertising company with a market value of more than $30 billion, overtaking current leader WPP. Publicis and Omnicom are each worth more than $16 billion.

Bloomberg, however, reported that the talks could still collapse. ()

New York-based Omnicom and Paris-based Publicis were not immediately available for comment.

The combination would represent the largest tie-up to date among advertising agencies, which have seen little consolidation in recent years. It would top Japanese firm Dentsu Inc's $4.9 billion purchase of Aegis Group in March.

The merged company would become the largest agency player in a global advertising market expected to grow 3.5 percent this year to $505 billion, according to a forecast from Zenith Optimedia, a research firm that is owned by Publicis.

Combining the firms could help them compete more aggressively for new business by bringing together the strengths of each in creative campaigns and media buying and planning, Wedbush Securities analyst James Dix said.

The new firm also may be better positioned to compete in fast-growing markets such as Brazil, China and Russia, he said.

"There is a certain logic to it for geographic purposes," Dix said.

If they do merge, "all in one swell swoop, suddenly they become a much larger scale player in a lot of these emerging markets."

The sheer size of the deal could draw scrutiny from antitrust authorities, Dix said, but added he was not aware of an agency merger that had been blocked by regulators.

Omnicom shares were up about 3 percent in trading after the bell. They closed at $65.11 on the New York Stock Exchange on Friday.

Publicis' shares closed up 1.5 percent at 59.35 euros on Friday.