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Dentsu reaps benefits of Aegis deal, wins business from rivals

Thursday, 21 Nov 2013 | 1:00 PM ET

BARCELONA, Nov 21 (Reuters) - Japanese advertising group Dentsu is winning global media contracts for the first time through its newly-acquired Aegis business and has been taking work away from rivals Omnicom and Publicis since the two decided to merge.

Tim Andree, executive chairman of Dentsu Aegis Network, said the business was growing rapidly since it acquired British media group Aegis, a deal announced in July last year.

Andree, speaking at the Morgan Stanley investor conference in Barcelona, said there had been no disruption as a result of the transaction and the group had managed to maintain its momentum.

"We've had some success when you look at our new business record in the past quarter, we've had a high percentage of that business coming from Publicis Omnicom."

Dentsu paid nearly a 50 percent premium to buy Aegis for 3.2 billion pounds in July 2012, in the biggest deal in its history, showing a need to expand outside its home market Japan.

It had earlier been a minority shareholder in French rival Publicis, but sold that stake in early 2012, netting nearly 645 million euros.

The Aegis deal made Dentsu the fifth largest ad agency globally based on revenues, behind WPP, Omnicom, Publicis, and Interpublic. It is also bigger than France's Havas.

Publicis and Omnicom unveiled their own plans to merge in July this year, saying it would give them more financial muscle to cope with technological change and its impact on advertising.

The announcement sparked speculation about whether the remaining large ad groups would need to merge to be able to compete.

Andree said acquisitions would remain a big part of the group's strategy but they would be mostly small to medium deals, of which there were about 50 to 60 in the pipeline.

"You'll see us continue to invest in companies in the emerging markets, the faster growing regions. And we'll continue to invest in digital," he said. "We don't really see anything in the pipeline of the size and scale of Aegis."

Andree also highlighted the risks of doing mega deals in terms of clients. "Anecdotally, clients are not really understanding the benefits for them. And that's always a dangerous position to be in," he said of the Omnicom-Publicis tie up.

Martin Sorrell's WPP, currently the world's biggest ad group, reported results in October that showed how it had snapped up new work, which analysts attributed to its two biggest rivals being distracted by their merger.

Andree said the group had made a big effort to keep both staff, including management, and clients on side when it bought Aegis.

"We went out of our way to communicate with the talent and leadership in the agencies that it was business as usual."

Dentsu shares are up roughly 80 percent this year, outperforming a 46 percent rise at WPP, a 43 percent rise for Publicis, and a 42 percent rise for Omnicom.

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