Aegis and Dentsu Are Stronger Together: CEO
Assistant News Editor, CNBC.com
Dentsu’s takeover of the digital communications agency Aegis would create a “compelling combination” of two companies looking to expand globally, Jerry Buhlmann, CEO of Aegis Group told CNBC.
Japanese advertising firm Dentsu has agreed to buy Aegis, the British marketing group, for 3.2 billion pounds ($5 billion) in a deal that would create the largest advertising agency in Asia and would become a global rival to existing dominant agencies such as WPP , Publicis and Omnicom .
The deal will also increase Tokyo-based Dentsu’s presence in Europe as Aegis has established a strong digital foothold in the continent since it was founded in 1968. Buhlmann told CNBC’s “Squawk Box Europe” that the tie-up heralds the first communications group “born in the digital age”.
“The rationale’s really quite straight forward. These two groups have very complimentary geographies and this provides an industrial shareholder base for Aegis. It’s a great combination, it’s the first communications group born in the digital age.”
After agreeing terms to pay 240 pence a share for Aegis — 48 percent higher than Wednesday’s closing price — markets reacted with the share price nearing the offer mark at 236 pence.
The deal is being recommended to shareholders and Buhlmann said it was great news for shareholders and stakeholders - staff and clients - as the bid would mean “continuity, stability and a platform for growth for both businesses going forward.”
Aegis, which posted gross profits of $1.1 billion in 2011, has clients including international brands Coca-Cola , Proctor and Gamble and Johnson and Johnson that have also been focusing efforts to expand into growing markets in south-east Asia and China. Buhlmann denied that Japan offered fewer growth prospects, saying that the deal would open up opportunities for both companies to develop client bases and to expand globally.
“Dentsu is a scaled business, 85 percent of its revenues are actually in Japan, whereas Aegis groups operate in over 80 markets around the world so a lot of the synergies will come from the ability from Dentsu’s strong client base in Japan to potentially expand around the world,” he said.
“I think that’s where the complimentarity really comes…it’s a great opportunity for both of us to develop our client bases in eachothers’ markets. Dentsu is very strong in Japan and does have operations in 29 other markets but Aegis is a truly global business outside of Japan.”
Buhlmann said that the premium on the trading price was the result of two years of “exceptional” performance, revenues and winning over of new business worth 6 billion pounds net.
“The Aegis business has been performing exceptionally well over the last few years, we’ve grown organically at twice the rate of our peers…and the highest profile in digital compared to other global networks-37 percent of our revenue is in Digital” he said, adding that the board was recommending the bid to shareholders.
“This is an attractive premium on the trading price… it’s an attractive price and the board are recommending it to our shareholders to approve.”