The relative strength of Omnicom's stock over the past year allowed the New York holding company to make a more financially reasonable deal for the British concern, Abbott Mead Vickers PLC.
The parent of the United Kingdom's largest agency, AMV BBDO, had been expected to strike an agreement to sell a majority stake to its American shareholder since 1991. That expectation, in part, held off the deal for so long, sources said.
Seven years ago, AMV sold 23.9 percent to BBDO, a position which has now increased to 27.7 percent. When Omnicom initially bought the shares, the company said it planned to increase its stake to 29.9 percent. Under U.K. securities laws, outside shareholders who purchase
30 percent of a firm's stock are required to bid for the rest of the company. Omnicom's early declaration of its intent signaled an eventual acquisition. Based on that expectation, AMV's shares have traded at high multiples ever since, making an earlier purchase too expensive, sources said.
Omnicom's stock has been fueled by other acquisitions and revenue gains, and is currently at a higher price-earnings ratio than AMV's (itself a high flier). So the deal--reportedly all in stock--is now easier for Omnicom to swallow. Omnicom traded at $52 and 3/8 at close on Dec. 3; AMV closed at 416.5 pence.
Under U.K. and U.S. securities laws, AMV and Omnicom executives cannot disclose terms of the transaction until its completion. The London press, however, has reported that Omnicom is offering about $580 million for the company.
With the acquisition, AMV would join TBWA--which entered the ranks of top British agencies after buying Simons Palmer Denton Clemmow & Johnson--GGT and BMP DDB in Omnicom's growing London stable.
AMV PLC, which reported revenues of $700 million in 1997, has also expanded into below-the-line services over the past few years. The company has more than 15 diversified, non-advertising marketing subsidiaries.