Publicis to focus on digital deals after merger collapse

CANNES FRANCE Fri Jun 20, 2014 12:57pm EDT

Maurice Levy, French advertising group Publicis Chief executive, reacts as he attends a joint news conference with Omnicom Group head, in Paris, July 28, 2013. REUTERS/Christian Hartmann

Maurice Levy, French advertising group Publicis Chief executive, reacts as he attends a joint news conference with Omnicom Group head, in Paris, July 28, 2013.

Credit: Reuters/Christian Hartmann

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CANNES FRANCE (Reuters) - Publicis (PUBP.PA) boss Maurice Levy plans to shift the French advertising group more quickly and deeply into digital services following last month's collapse of his plan to merge with Omnicom (OMC.N) to create the world's largest ad agency.

The 72-year-old Levy, chief executive for the past 27 years, finds himself having to regroup and rebuild investor confidence before he steps down next year.

He told Reuters on Friday he would look to acquire smaller digital companies as well as increase the dividend. Later this year the company will start looking to find his successor.

"I am 100 percent focused on the future. I am not very much interested in the past; it is the end of the story," he said of the failed merger. "I am focusing on how we are going to sharpen our strategy."

Levy put the possibility of another merger on the scale of the Omnicom tie-up at "zero".

The $35 billion deal would have created a group bigger than industry leader Britain's WPP (WPP.L) and better placed to compete with technology rivals such as Google (GOOG.O) and Facebook (FB.O). Levy and John Wren, his counterpart at U.S. giant Omnicom, had planned to share the CEO role for the first 30 months.

But the deal, originally heralded as a merger of equals, fell apart last month as both sides fought to take control of the group.

Levy admitted on Friday that cultural differences had become a real issue, while the companies had also realised they could not deliver the promised benefits to shareholders.

The Frenchman denied however that the group had become distracted and rejected suggestions from his rival, WPP boss Martin Sorrell, that Publicis had lost work during the process.

Sorrell, who has been a critic of the deal since "day minus one" as he put it on Wednesday, said clients had been exiting Publicis and Omnicom at the rate of "four-to-one in our favor".

Speaking at the Cannes Lions industry gathering, Levy said the company had not lost clients beyond the usual cycle of losses and wins typical in the advertising business.

"It is silly to have this kind of war," he said. "I would prefer to see Martin using the British sense of humor, which is so witty and so interesting."

DIGITAL DEALS

To win back investors, Levy said the group would look to bulk up in digital services and raise its dividend.

"Next year our payout ratio will be 35 percent, and we plan to maybe increase it to 40 percent," he said. "We are thinking about it."

Levy said marketing on digital devices such as tablets and smartphones and on platforms such as Facebook was growing fast, accounting for 40 percent of revenue this year and likely to be more than half by 2018.

Some digital development will come from partnerships and some from acquisitions, he said. "No one should dream about huge acquisitions. There will be some reasonable-sized ones," he said. "They will be all in digital."

Levy said the Publicis board would start to tackle the question of who will succeed him at the end of the year.

His tenure ends at the end of 2015, and he said he will not seek a new mandate. Board deliberations will probably continue in the first half of next year, he said.

On current trading, Levy said he still expected growth in the second quarter to be lower than in the first and an acceleration to come in the third.

"We don't expect any particular good news for the second quarter. We will be slightly positive, but very slightly, and we expect very good growth in the third quarter," he said.

(Reporting by Paul Sandle; editing by Kate Holton and Jane Baird)

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