Tax hurdles throw doubt on advertising mega deal

 
Oliver Smith
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OMNICOM, the world’s second largest advertising agency, said yesterday it is unable to predict when its $35.1bn (£20.8bn) merger with Publicis Groupe would close, raising concerns that the deal might not go through.

Omnicom said the mega merger has yet to receive approval from antitrust authorities in China or approval to establish tax residency in the United Kingdom for the newly merged firm, which has delayed the deal.

Chief executive John Wren said during the firm’s first quarter earnings call: “Given the proposed merger complexity and open issues, at this point it’s not practical to say exactly when the transaction will close.”

Wren added that if the companies were unable to obtain the tax residency approvals, “it could affect the likelihood of satisfaction of the conditions to closing of our deal”.

Last July when the merger was announced, both companies said the deal would close as soon as the end of December 2013.

Then in October, Omnicom said it expected the merger to close in early 2014, and in February it said that the deal was likely to close in the third quarter of 2014.

“With respect to a number of items (for receiving tax approvals)... there is no Plan B,” Wren said yesterday. “Those things are requirements to get to a closing.”

Tax approval from France is also pending, the company said.

“The most interesting comments were from Omnicom on the merger. Reading between the lines, they sounded less confident on the merger going through, more because of complications regarding tax domicility,” said Liberum media analyst Ian Whittaker, who added that if the deal fell through it would benefit rival advertising giant WPP.

US-listed Omnicom, which owns BBDO, DDB and TBWA, yesterday reported its worldwide revenues grew three per cent during the first quarter to 31 March to $3.5bn, while reported earnings before tax rose 2.5 per cent to $407.1m.