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Takeaways from the Key Notes
- Interpublic Group of Companies shares surged Monday after Omnicom Group said it had struck a deal to acquire its rival in an all-stock deal that would form the world's largest advertising company.
- Citi analysts said a deal, if attempted, would be "apt to be approved" by regulators.
- Omnicom spokesperson said that Interpublic is valued at $13,25 billion.
Interpublic Group of Companies shares (IPG) surged 10 percent Monday following Omnicom Group’s announcement that they would be acquiring their rival, Omnicom Group in a 100% stock transaction. The combined company will become the largest advertising firm on earth.
It is anticipated that the stock-forstock transaction will be free of tax for investors and close by the end of the 2025 second half. Omnicom and Interpublic shareholders must also approve the deal. It is subject to the approval of both Omnicom’s shareholders and Interpublic’s regulators.
Interpublic stockholders will receive 0.3444 Omnicom share for every Interpublic share they hold. Omnicom will hold 60.6% and Interpublic will be 39.4% of the combined business when the deal is closed. Omnicom stated that the merger would lead to annual synergies in excess of $750,000,000.
Interpublic shares which lost 10% of their value in the past year ended Friday’s trading at $29.26. The company has a value market capitalization of approximately $11 Billion.
Omnicom spokesperson said that Interpublic is valued at $13,25 billion.
The combined Omnicom and Interpublic Company would beat WPP’s revenue
According to 2023 data, the annual net profit of a combined company is estimated at $25.6billion. WPP (WPP), the current largest advertising agency, is expected to generate net revenue in 2023 of approximately $15 billion.
The combined revenue for 2023 came from 57% in the U.S., and 43% abroad.
John Wren, Chairman & CEO of Omnicom, will retain his roles if the deal is approved. Interpublic CEO Philippe Krakowsky and Daryl Simm will be the new company's co-presidents and chief operating officers.
Omnicom’s shares fell by 6% intraday Monday, despite a year-to date gain of almost 20%.
Citi Says Deal 'Apt To Be Approved'
Citi, in an article published Monday morning, said that investors could expect regulatory obstacles to the proposed deal. However, Citi also noted there was plenty of competitive pressure from other agencies, consulting firms, tech companies, etc.
"While regulatory questions will certainly be raised, we believe this transaction is apt to be approved (if it is attempted)," the Citi analysts wrote, noting that "mergers among large agency holding companies are rare." .
UPDATE—Dec. The article was updated on December 9th, 2024 to include the most recent stock prices.
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