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Publicis Lands Bcom3

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As Maurice Lévy looked out from his chic Champs-Élysées offices last week, it was only fitting that 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 Japan's Dentsu give the French company revenue of $4 billion, generated by 38,000 em ployees worldwide—taking the Paris-based com pany from No. 6 to No. 4 in the rankings of global communications entities.

The deal widens the distance among players, with those in the middle—Publicis' French rival Havas, beleaguered Cor diant Communications, Grey and Aegis—in a lonelier, increasingly 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. "Before, you had Publicis, Grey, Havas, Leo Burnett. 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, McManus Group, joined forces with Leo Group, the parent of Leo Burnett. When that initial public offering didn't come off last year, Lévy saw new opportunity. The talks that concluded last Wed nesday night began as casual chats between Lévy and Bcom3 CEO Roger Haupt in late September. As negotiations got more serious by year-end, other top Bcom3 executives were spotted in Paris.

The sale of Bcom3 comes as no surprise, even if its choice of a parent does. It was widely anticipated that Dentsu, which owns 22 percent of Bcom3, would make a move on the Chicago-based concern 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 process. But according to Haupt, 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.

Though Dentsu is the world's largest ad agency, it has had dif ficulty expanding beyond Japan. The possibility of Dentsu owning Bcom3 outright was also discussed, and Dentsu actually offered a higher bid than Publicis, sources said. It was decided that the three-way partnership under the 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 the Publicis deal.

Observers consider $3 billion—to be paid in the form of stock and equity-linked securities—to be a good price for BCom3 in a tough year, especially considering Dentsu will have invested close to $1 billion in the company.

About 660 of BCom3's 19,000 employees own company shares. The securities issued at closing will carry lock-up provisions varying from six months to four years. The transaction is expected to close June 30.