Lévy Lands a Coup for Publicis

As Maurice Lévy looked out from his chic Champs-Élysées offices last week, it was only fitting his view included the Arc de Triomphe. After failed attempts to expand his global reach through a partnership with True North and a bid for Young & Rubicam, the Publicis Groupe CEO has finally made it into the industry's top ranks. Lévy's $3 billion purchase of Bcom3 Group and new partnership with Dentsu gives the Paris-based company revenue of $4 billion, gen erated by 38,000 employees worldwide—and takes Publicis from No. 5 in the rankings of global communications entities to No. 4. With four media-agency brands, Publicis will claim more than $31 billion in worldwide media bill ings—second to IPG—and, via Dentsu, gains access to Japan, the world's second-largest advertising market. The transaction is expected to close June 30.The deal widens the distance between players, with the middle—Publicis' French rival Hav as, Cordiant Com munications, Grey and Aegis—in a lonelier, in creasingly less competitive position. "As the industry went from consolidation to further consolidation, we had no choice but to make this happen," Lévy said.Omnicom chief John Wren praised Lévy's strategy. "He's smart in distancing Publicis from the midrange. This puts pressure on smaller companies," he said. "You can't run a $1.5 billion boutique—you lose a big client, and you're in trouble. It's a bold move for Publicis."Lévy first talked to D'Arcy Mas ius Benton & Bowles in early 2000, before its parent, MacManus Group, joined forces with Leo Group, the parent of Leo Burnett. When that IPO didn't come off last year, Lévy saw new opportunity. The talks that concluded last Wednesday night began as casual chats between Lévy and Bcom3 CEO Roger Haupt in late September. The sale of Chicago-based Bcom3 comes as no surprise, even if its choice of parent company does. It was widely anticipated that Dent su, which owns 22 percent of Bcom3, would make a move on the company after it postponed an IPO last year. After March 14, Dentsu would have been able to sell its shares to institutional investors. Haupt said Dentsu was consulted throughout Publicis' courting proc ess. Haupt claimed the March 14 deadline was unimportant, and he said he doesn't believe Dentsu was looking to unload its shares. "There was never any question of doing anything that didn't have Dentsu as a partner," said Haupt, who becomes Publicis' president and chief operating officer, with a seat on the company's board. He remains based in Chicago. Dentsu is the world's largest ad agency, but it has had trouble expanding beyond Japan. The possibility of Dentsu owning Bcom3 outright was also discussed, and Dentsu offered a higher bid than Publicis, sources said. It was decided the three-way partnership under Publicis' flagship was more strategically sound. Dentsu will now hold a 15 percent stake in Publicis, for which it is paying approximately $500 million. (Its joint venture with Young & Rubicam in Asia is unaffected by this deal.)Observers consider $3 billion—which will be paid in the form of stock and equity-linked securities—to be a good price for Bcom3, especially considering that Dentsu will have invested close to $1 billion in the company. About 660 of Bcom3's 18,000 employees own company shares. The securities issued at closing will carry lock-up provisions varying from six months to four years. As far as potential client conflicts, Lévy asserted that the autono mous operating structure of Publicis' holdings will avoid problems. "We've talked to all of our major clients, and they've blessed this," he said, pointing to the peaceful co-existence of L'Oréal at Publicis and Procter & Gamble at Saatchi & Saatchi.A number of rival brands are now under Publicis Groupe's roof, including General Mills (Saatchi) and Kellogg's (Burnett), and the airline triumvirate of United (Fal lon), Delta (Burnett) and Continental (N.W. Ayer). There are a half-dozen car brands with the addition of D'Arcy's Cadillac and Pon tiac.As to Bcom3's Starcom MediaVest Group and Pub licis' Zenith Optimedia Group (co-owned with Cordiant), sources said they will likely remain autono mous. But one source suggested Publicis will form a holding company to run all the media agencies.The question now is whether Lévy's empire building is complete. "It's not Maurice's temperament to stay at No. 3 or 4," said a former colleague. "I think he's going to go at it again."

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Lévy Lands a Coup for Publicis

Noreen O'Leary

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Noreen O'Leary