Tokyo-based advertising giant Dentsu Inc. will buy London-based media and digital communications company Aegis Group. It is a £3.16-billion (approximately $5-billion) bid to gain a larger foothold in Europe and the U.S., and expand Dentsu's digital and media offerings around the world.
The deal is part of a larger plan that Dentsu has been working on in the past three years to expand its business globally.
It is also part of the ever-growing consolidation of the advertising business around the world under large multinational holding companies. As advertising agencies seek to cater to more clients with global marketing strategies, greater reach is part of the perk of network ownership. Dentsu has agencies in 29 markets around the world, including Canada, but the vast majority of its revenue still comes from within Japan.
Dentsu's plan has also focused on increasing its ability to provide clients with digital services and expertise.
"Dentsu faces strong client expectations to strengthen digital solutions," the company noted in disclosure documents related to the deal. That has led it to other purchases such as the U.S. digital firm 360i in 2010. Aegis's holdings include the agency Isobar, which has digital expertise, and iProspect, which does work online and in search engine marketing.
Last month, Dentsu expanded its Canadian operations to increase French-language offerings, with the acquisition of Montreal-based advertising agency Bos. It merged Bos into its Toronto-based agency, Dentsu Canada under the name DentsuBos.
Aegis counts Coca-Cola Co. and Walt Disney Co. among its clients. The group had worldwide revenue of £1.07-billion last year, citing especially strong profit growth in the Asia Pacific region and the Americas.
Aegis's board of directors is recommending that shareholders accept Dentsu's offer, which has already been accepted by the group's largest shareholder, Bolloré Group. The offer represents a 48-per-cent premium on Aegis's share price as of market close on Wednesday, and 45 per cent on the average share price over the past three months. Shareholders will vote on the offer at the company's annual general meeting in August.
The deal also requires court approval. It is expected to close between October and December of this year.
All the Aegis agencies will continue to operate in the same locations, and its head office will remain in London. Employee and client contracts will not change, chief executive Jerry Buhlmann said.
"Dentsu and Aegis are coming together from their respective position of strength following a period of significant change in the advertising and marketing industry. The timing of this combination following the change in the structure of our industry means that we can create a global business for the digital age," Dentsu president and CEO Tadashi Ishii told analysts on a conference call Thursday.