INTERNATIONAL. Dentsu Inc. (4324), the 111-year-old Japanese advertising company, agreed to buy Britain’s Aegis Group Plc (AGS) in a 3.16 billion-pound (US$4.9 billion) deal to create a global media and marketing network.
Aegis shareholders will get 240 pence in cash, or 48% more than the stock’s close in London yesterday, in an offer recommended by directors, the companies said in a statement.
Tokyo-based Dentsu has bought a 15% stake and agreed to acquire a further 5% from companies controlled by Vincent Bollore, Aegis’s largest shareholder. Aegis jumped 46% to 235.8 pence at 8:24 a.m. on the London exchange.
The deal will create a company with 33,000 workers and make Dentsu, which generated almost 90% of its annual revenue from its home market, the world’s largest independent buyer of of advertising space. Aegis in January won a contract to manage US$3 billion yearly advertising spending for General Motors Co. (GM), the biggest win in the U.K. company’s history.
The combination will “create a new global communications network for the digital age focused on delivering best-in-class brand, media, digital and marketing services for the combined client base through a fully-integrated and scalable platform,” Aegis said in the statement.
Analysts have speculated for at least a year that Bollore might sell his stake in Aegis. Morgan Stanley said in March that Bollore wasn’t “wedded” to his stake, which may lead to approaches.
Bollore will retain a 6 percent stake in Aegis, though Dentsu has an “irrevocable commitment’ to acquire those shares in the future, Tim Andree, senior vice president of Dentsu, said on a conference call today. Dentsu acquired the stake from Bollore last night, he said, adding Bollore was ‘‘very supportive of the deal.’’
Dentsu has a target to boost its operating profit to 70 billion yen (US$883 million) for the year ending March 2014 with measures including acquisitions and winning new clients. It had an operating profit of 52 billion yen last fiscal year.
The stock fell 1% to 2,306 yen at the close of trading in Tokyo today.
About 80 percent of Aegis’s 2011 revenue of 1.14 billion pounds came from outside the Asia-Pacific region, according to Bloomberg data.
Harold Mitchell, who is is executive chairman of Aegis Media Australia, will retain his seat on the Aegis board, Aegis Chief Executive Officer Jerry Buhlmann said.
Mitchell controlled Australia’s biggest independent buyer of advertising space Mitchell Communications Group Ltd. before agreeing to sell the business to Aegis for A$363 million in July 2010. He founded his original business Mitchell & Partners in 1976.
Aegis directors, who are advised by Greenhill and J.P. Morgan Cazenove, consider the terms of the offer to be fair and reasonable, and will recommend the bid to shareholders, the company said.
The deal is the biggest acquisition in Dentsu’s history, said CEO Tadashi Ishii. Combining the two companies ‘‘is not an easy task,” he said, though the two companies together “will have the highest growing potential as a group.”