Since two global agencies Publicis and Omnicom announced their $35 billion merger plan last year, things have not worked out as expected. Their disagreement on who gets what is stalling the sealing of the merger. They are, however, looking beyond their planned merger to invest in some agencies in Nigeria. ADEDEJI ADEMIGBUJI reports.
If the plan falls through, the proposed merger of two global agencies – Publicis and Omnicom – will shake the advertising world. The proposed $35 billion merger was announced in July last year, but since then, things up have not worked as expected. They have yet to agree on who gets what.
Despite these teething problems, they are looking beyond their differences to fish in some local markets. Publicis is eyeing some agencies in Nigeria, especially the Biodun Sobanjo-led Troyka Holdings comprising Insight Communications, Azzagai, Optimum Exposure, Media Perspective, MediaCom, The Quadrant Company and Halogen Security.
In a report by Reuters, Publicis and Omnicom have not agreed on who will be the legal acquirer, which is delaying crucial paperwork with the United States (US) Securities and Exchange Commission, according to the report.
Despite the companies owning 50 per cent of the new entity, analysts say that technically one has to acquire the other for accounting reasons. For now, Omnicom and Publicis have stopped meetings of about 70 integration committees, where they present their networks, teams, organisation, the Journal said, citing sources. 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. While Omnicom wants its finance chief Randall Weisenburger to be the new CFO of the merged entity, Publicis is backing CFO Jean-Michel Etienne for the job.
Legal and tax issues are also threatening the planned merger.Last Tuesday, Omnicom said it could not 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.
When the planned merger was unveiled last year, some agency chiefs thought that under the deal, the Nigerian market may not matter to Omnicom and Publicis, except that of Middle East, Asia and South Africa, which is key to the French and United States marketing communication giants.
As a member of MINT (Mexico, Indonesia, Nigeria, and Turkey), which global economists and financial analysts regard as new kids on the block, the country’s growing economy appears to have attracted the global advertising groups.
Those privy to the Publicis-Troyka deal since last year told The Nation that the proposal was stalled by the Advertising Practitioners Council (APCON) reform, which changed the ownership structure of advertising agencies from indigenous, local, national, foreign to international.
According to APCON, every foreign agency coming into Nigeria is expected to produce a bankers’ credit guarantee of N500 million and produce N500 million cover from an indigenous bank and insurance firm.
Under the National Categorisation of agency ownership, foreign direct investors cannot own more than 25 per cent while under the foreign ownership structure, foreigners cannot own less than 74.9 per cent and 100 per cent.
Publicis planned 25 per cent equity in Troyka will create huge upset as it may consume Starcom Media brand identity, Starcom Media Vest.
At a forum in Lagos, Mr. Gorge Thorpe, founder of Mediareach OMD, Tequila Nigeria, TBWA Concept, criticised APCON’s reform as it affects foreign direct investment, saying it would prevent growth.
“Protectionism best serves the short term to longer term interest of the advertising industry. APCON should please rethink the Proclamation on Registration and Licensing Regime in the Advertising Industry,” Thorpe said.
But Sobanjo believes that the industry should embrace good business model to survive.
Also last year, Dentsu, a leading global agency made moves to buy bigger equity in two leading agencies but was stopped by APCON reform, which gives the number of equities a foreign agencies can acquire in a Nigerian agency.
The global agency, however, engaged Media Fuse, founded by former Media Perspective Managing Director, Emeka Okeke.
Under the arrangement, Media Fuse is a beneficiary of the Carat affiliation. It was gathered that Dentsu’s equity involvement of 25 per cent in Media Fuse will cover the acquisition of big advertising shops and other auxiliary businesses in the integrated marketing and advertising services.
When contacted over the Publicis-Troyka planned merger, Sobanjo said he was hearing about it for the first time. “I’m hearing this for the first time from you but if you said you heard that why not wait for Troyka to tell the world.” But, in response to inquiry by an industry online publication, marketingedge.com.ng, Sobanjo said: “I am afraid there is little or nothing to say at this point. At the appropriate time, I hope we sure will let you know. For now, we continue to follow the things we read and hear.”
A source, who just left Insight, told The Nation that, though Troyka is into something big that will shake the industry by the time the management sees the project through, the media would be informed. “For now, it remains within the group but the only person who can talk on it is Mr. Sobanjo,” the source said.
The Managing Director of Starcom, Mr. Ayo Kupoluyi, told The Nation that though it is true that Publicis has pitched tent with Troyka Group, that will not make businesses to move. “What I know is that Publicis has agreed to pitch tent with Troyka Group. I don’t know about sweeping Starcom off its businesses. Our GMD is the authorised person to speak on the details as he represents the group,” he said.
On the future of Starcom Media, Kupoluyi told an online publication: “For me, the future is very bright at Starcom Media. As it is, details of the partnership between Troyka and Publicis are still unknown, but what we know is that our former partner has taken its decision. Business for me is not about emotion, what is permanent in business is the interest. Business itself is dynamic. If the wind of business does not blow favourably in your direction today, it does not mean that is the end of the world. In our own line of business, accounts come and go. At Starcom Media, we are very positive and the future is very bright.”
Kupoluyi said some of the businesses the media shop handles were won through local pitches, where the agency was rated purely for its professionalism and competence.
He said there were other businesses too, which were won through global pitches. These, he explained, can only be moved out of the agency if the local clients so desire. But for some, he said, they would naturally move in line with global account re-alignment.
Despite the apprehension over the effect of Omnicom’s and Publicis’ merger on advertising agencies in Nigeria, some stakeholders told this reporter last year that it is a global phenomenon that will not affect Nigerian agencies that have relationship with the global agencies. The CEO of DDB Lagos, Mr. Ikechi Odigbo, said: “I don’t foresee conflict at the subsidiary levels. The global networks though are owned by the two holding companies that have come together, but they have bouquets of global brands they work for. At local levels, they will not be operating as if they are sister companies. If a pitch is thrown open they could all compete.”
The CEO of X3M, Mr. Steve Babaeko, said while the advertising industry is trying to make a mark on the continental level, the effect may be pronounced in the Middle East, Asia and India than Africa where Nigeria belongs. Mr. Kayode Oluwasona, who was then the CEO of Rosabel, an affiliate of LeoBurnett, said: “It is a global phenomenon. It is holding company goal. At the international level, they are merging to deepen their financials. For us in Nigeria, yes, some agencies are part of Omnicom and Publicis groups, but globally it is the issue of the biggest.”
For, now, Publicis and its partner, Omnicom are still struggling to conclude their merger.
