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WPP beats Havas in $1.5b Grey takeover

GLOBAL: The WPP Group has successfully outgunned competition from Havas and private equity firm Hellman & Friedman to win the battle for Grey Global Group, the world's seventh largest advertising network.

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The acquisition was announced at a cost of US$1.52 billion, or $1,005 per Grey share, and will see Grey Global Group CEO and chairman Ed Meyer continue in both capacities until at least the end of 2006.

In a statement, the WPP Group also confirmed that Grey would operate as an independent unit, and targeted the agency to increase its operating margin to 10.5 per cent in 2005, from its current level of 5.8 per cent.

Jon Fox, Grey Global Group executive vice-president for global business development and interim Asia head, reiterated that Grey's Asian operations would not change as a result of the acquisition.

"Grey Global Group will remain as an independently-managed entity within the WPP group," said Fox.

"Thus, our merger with WPP will not change our operations in Asia."

Fox also confirmed that he would continue to lead Asia in an interim capacity, and that Grey media network MediaCom would "continue to develop its capabilities in the region".

Fox has been leading the search for a new Asia-Pacific regional president since Eric Rosenkranz abruptly left the post in February this year.

While Grey's operations in Asia are viewed as solid, MediaCom is considerably smaller than other media agencies in the region. According to Recma figures for 2003 and the first quarter of 2004, MediaCom has a 4.1 per cent market share of the Asia-Pacific media market, including Japan.

With the purchase, WPP is seen as consolidating its leadership position in Asia, where its Group M media network accounts for over a quarter of the regional market, according to Recma. In addition, its key creative agencies - J. Walter Thompson and Ogilvy & Mather - are regional giants.

"It reinforced WPP's role as a leader in Asia," said an industry source.

"With Grey on board, WPP's revenue for 2003 would be US$950 million by our estimates - likely over US$1 billion in 2004. That will make them around 33 per cent larger than the next holding company, Omnicom."

Rosenkranz himself termed the deal a "win-win" for WPP and Grey. "Grey will be part of a big global operation," he said. "Grey people have never been managed for profit. (It will benefit them) to get objectives and missions."

The deal will see key Grey client Procter & Gamble brought into the WPP fold, despite the conflicting presence of consumer goods giant Unilever.

Other clients include BAT and Nokia.

As for Havas, the French advertising group is increasingly being seen as a takeover target. Its Asian presence - Arnold Worldwide and Euro RSCG Worldwide- is relatively small.

This article was first published on Media Asia

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