MUMBAI: In its first serious effort to challenge the bigger media agencies, Japanese media conglomerate Dentsu is buying out UK-based Aegis Media Group for a whopping $4.9 billion.
Joining the acquisition fever gripping the top media agencies, Dentsu‘s buyout of Aegis will place the Tokyo-based agency in the top position in the Asia-Pacific region while it becomes the second largest in western Europe, the fastest growing in North America and a global leader in digital markets.
The deal will also have India implications where Dentsu had expressed its ambitions to grow. In January 2011, it had bought out its local joint venture partner to take full control. The price: $2.4 billion for Sandeep Goyal-promoted Mogae Media‘s 26 per cent stake each in Dentsu Communications, Dentsu Marcom and Dentsu Creative Impact.
“Dentsu and Aegis independently were not too big a force in India. But the combined strength will provide the muscle power for them to build and grow strong in one of the fastest growing ad markets in the world,” said a top executive in a leading agency on condition of anonymity.
When contacted, both Dentsu and Aegis declined to comment on the deal.
A source, however, said the details would emerge only after the deal was consummated and complete. The entire realignment would follow after that, expected around April 2013. The first stage would be restructuring globally, followed by specific regions and then each country.
Dentsu expects the scheme of arrangement to become effective during October – December 2012, subject to anti-trust clearance and other conditions.
Overwhelmingly dependent on the home market for clients, Dentsu had earlier in its medium-term plan stated that it would focus on global business expansion and intensify its digital offerings while strengthening its mass media business.
Dentsu initiated talks with Aegis in June, eyeing the agency which analysts had speculated would look for a buyer. The selling of the Synovate unit to France‘s Ipsos was only to make that task easier for a suitor.
The Japanese agency was preparing the ground after terminating a nine-year partnership with Publicis in February. Selling off its shares to Publicis for €644.4 million, Dentsu had the cash to look for purchases that would allow it to penetrate into the UK, European and US markets.
The acquisition of Aegis will make Dentsu one of the leading global media and marketing company. In January, Aegis won the General Motors Co. contract worth $3 billion of yearly advertising.
Dentsu president and CEO Tadashi Ishii said, “I am pleased to announce this exciting and transformational combination between Dentsu and Aegis. Together, we will be able to deliver fully integrated and best-in-class services to our clients through a new global communication network born in the digital age offering a broadened service portfolio. Dentsu and Aegis will be the market leader in the Asia-Pacific region, enjoying a strong presence across Europe and the fastest growing agency network in the US.”
The best part is that Dentsu has hardly any overlap with Aegis. The combination will be complementary, bringing together a global media platform with capabilities to provide integrated solutions and offer enhanced quality services to clients.
The geographical fit is highly complementary. Dentsu has a leading market position in Japan‘s advertising and marketing sector, an established presence across Asia, and an increasingly expanding business in the US.
Aegis, on the other hand, enjoys a leading position showing strong presence across Europe and increasingly in the US. Moreover, Aegis is rapidly growing its footprint across emerging markets, and has established robust positioning in Asia excluding Japan.
Together, the enlarged group will be a stronger global competitor with the scope and scale to compete for and win international mandates across Japan, Europe, Asia Pacific and the Americas.
Also, following the transaction, the combined group will have a strengthened ability to offer a wider spectrum of niche services and expertise as a full service agency.
Dentsu faces strong client expectations to strengthen digital solutions. With the rise of digital consumption and client demand for digital services, Dentsu has successfully enhanced its digital solutions over the years. By integrating Aegis, with Isobar and iProspect‘s digital strengths in creative origination and performance marketing, the combined business will provide a powerful global platform for media, content and digital technology, and will increasingly support client activities.
The combination of Dentsu and Aegis, with its robust client portfolio, will count at least 71 out of the top 100 marketers as clients on a combined basis, and will provide global and local clients with a new, differentiated proposition to achieve their objectives, and also accelerate the drive to continuously create new innovations as one unified group, Dentsu said in an official statement.
Aegis CEO Jerry Buhlmann said, “This is a compelling combination of two great businesses that will create one of the world‘s most dynamic marketing services groups – and the first to be born in the digital age. We at Aegis are delighted at the prospect of being able to play a full part in helping Dentsu create a platform for global growth and continued digital innovation. By forming the first communications group with true global reach, the growth strategies of both businesses will be enhanced as we provide more scale, geography, capability and investment to support clients.”
