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(Reuters) - A merger of Omnicom Group Inc (OMC.N), the No.1 U.S. advertising company, and French rival Publicis Groupe SA (PUBP.PA) has hit a roadblock following disagreements over terms of the deal, the Wall Street Journal reported Friday, citing people with knowledge of the situation.
Last July, both companies announced the proposed $35 billion merger that would overtake WPP Plc (WPP.L) as the world's largest advertising company.
The companies have essentially not agreed on who will be the legal acquirer, which is delaying crucial paperwork with the U.S. Securities and Exchange Commission, according to the report.
Despite both companies owning 50 percent of the new entity, technically one has to acquire the other for accounting reasons.
Omnicom and Publicis have stopped meetings of about 70 integration committees, where they present their networks, teams, organization, the Journal said, citing sources. (link.reuters.com/nax78v)
The companies are also unable to agree on the filling of senior posts in the to-be-created advertising behemoth, particularly the position of chief financial officer.
Omnicom wants its finance chief Randall Weisenburger to be the new CFO of the merged entity, while Publicis is backing CFO Jean-Michel Etienne for the job, the Journal reported.
Omnicom and Publicis could not be reached for comment outside regular business hours in the United States and France.
The instability surrounding the merger has benefited rival WPP, which posted a much better-than-expected first-quarter revenue growth on Friday, helped by a surge in new clients linked to the merger.
"I think the best result for us, frankly, would be for the deal to go ahead with joint CEOs, you know, fighting with one another about who's running the company," WPP chief Martin Sorrell said in a Reuters Insider interview following the results. (Reuters Insider: r.reuters.com/qax78v)
Sorrell said that people he spoke with have said there's a third to 50 percent probability that the deal will not go through.
Legal and tax issues are also adding to the conflicts related to the merger. Omnicom on Tuesday said it was unable to predict when the deal would close, following uncertainty over approval from antitrust authorities in China, a big market for Publicis, and for establishing tax residency in the United Kingdom.
Both companies will have to get approvals from the revenue and customs authority in the United Kingdom and the finance ministry of the Netherlands, where the new British company will be headquartered.
Tax approval from France is also pending, Omnicom has said.
Reporting by Sampad Patnaik and Aman Shah in Bangalore; Editing by Lisa Shumaker