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Japanese agencies join to form second largest ad group

TOKYO - Three of Japan's leading advertising agencies, including Hakuhodo, are to merge to form a new holding company, which will become the country's second largest advertising group after Dentsu.

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Hakuhodo, together with Daiko Advertising and Yomiko Advertising, have said that they have agreed on the principle structure of the operations of the group, which will be created in autumn next year.

The deal will see the three agencies operating under one umbrella and the formation of a fourth agency, which will handle media buying and other media transactions.

The companies said that the new group would aim for public listing at the earliest possible opportunity.

The new group, which is yet to be named, will be the second largest in Japan behind Dentsu and have billings of around Y1,000bn (£5.2bn). It will be ranked eighth largest in the world. The three companies already entered into an agreement in October 2001 to collaborate on the sale of advertising space and to establish joint media research and development.

In a statement, the companies said the move was in response to the stagnant economy and the downward trend in advertising. "The newly formed group will be dedicated to providing benefit to each of their clients and media companies and will provide useful information for a better living to all sei-katsu-sha (living consumers)."

Hakuhodo, the second largest advertising agency in Japan, is headed by president and CEO Toshio Miyagawa. The company has a small office in London and has ventures in Australia and Japan, where it has an agreement with Shanghai Advertising.

Daiko is headed by Hideki Nakao, and is 20% owned by the Interpublic Group of Companies. It has a strategic agreement with Lowe & Partners, also part of Interpublic. Yomiko represents Zenith Optimedia in Japan and recently entered into a partnership with M&C Saatchi.

Rival ad group Dentsu floated on the Tokyo Stock Exchange on November 30 2001. Since then, it has suffered from the advertising downturn and continuing problems in the Japanese economy. Last month, it said that group operating profit for April to September was down 23% from the same period last year to Y23.68bn, after clients cut advertising budgets.

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