Publicis to buy U.S. digital ad firm Sapient for $3.7 billion

Mon Nov 3, 2014 1:06pm EST
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By Leila Abboud

PARIS (Reuters) - Publicis (PUBP.PA: Quote), the world's third-largest advertising agency, is to buy U.S.-based digital ad specialist Sapient SAPE.O for $3.7 billion in cash as it seeks to accelerate growth after a botched merger earlier this year.

The French group is hoping rapid growth in both North American and Internet advertising, which are far outpacing European and traditional ad formats, will help it catch up with sales gains at rivals such as WPP (WPP.L: Quote) and Interpublic (IPG.N: Quote).

Chief Executive Maurice Levy has blamed Publicis' recent poor performance on a failed merger with world No.2 ad agency Omnicom (OMC.N: Quote), announced in August 2013 and abandoned in May over control and cultural clashes.

But some analysts said Publicis' offer of $25 per share, a 44 percent premium to Sapient's closing price on Friday, was a hefty price for a company whose growth may have peaked.

The transaction, which followed an unusual rally in Sapient shares and options last week, could also dash hopes among the French company's shareholders that cash might be distributed to them, analysts said.

Publicis shares fell 2.3 percent, while Sapient was up 42 percent at $24.59 in early afternoon trading.

"A good asset at a steep price," said Exane BNP Paribas analyst Charles Bedouelle of the deal, adding it would "likely push back (Publicis') cash return story by two years."

UBS analyst Tamsin Garrity said Publicis had been under pressure from investors to return cash, and was expected to announced share buybacks at a strategy day on Friday.   Continued...

Maurice Levy, Chairman and Chief Executive Officer of Publicis Groupe, attends the company's 2013 annual results presentation in Paris, February 13, 2014.   REUTERS/Gonzalo Fuentes