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Merger of advertising giants Omnicom, Publicis foundered on definition of 'equal'

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PARIS - A day after Publicis and Omnicom called off their $35 billion combination, the two CEOs said it came down to a question of balance.

The deal to combine France's Publicis Groupe and Omnicom Group on the United States collapsed due to clashes over how to implement a "merger of equals" in creating the world's biggest advertising firm, the CEO of the French company said Friday.

Maurice Levy, the strong-willed head of Paris-based Publicis, denied it was a question of a personality clash with John Wren, his counterpart at Omnicom, but rather a fundamental difference on balancing the leadership of the new firm.

Levy said he was deeply disappointed that the deal announced last July fell apart. But, he said, "balance means balance."

In a separate call with media and investors on Friday, Wren blamed differences in management and other key issues like a politically charged environment for mergers between European and U.S. companies.

"We knew there would be differences in the corporate culture," Wren said. "But I now know we underestimated the depths of those differences."

Wren added that he knows that each of the major operating decisions could have been resolved, but it was taking too much time and it didn't bode well for the future of the combined company.

But he emphasized that he saw the deal as an "opportunity," not a "necessity."

The merger, announced last summer, was intended to help the firms counter the growing clout of Internet giants such as Facebook and Google, which can bypass advertising companies altogether, as well as strengthen growth in Asia and Latin America.

The companies issued a joint statement late Thursday saying they mutually agreed to call off the deal because they were not able to complete the merger in a reasonable time frame.

Omnicom Group Inc., based in New York, owns BBDO Worldwide, DDB Worldwide Communications Group and TBWA Worldwide, among other agencies. Publicis Groupe SA runs its namesake agency as well as Leo Burnett Worldwide, Saatchi & Saatchi, and DigitasLBi.

Levy said the two CEOs had agreed that Wren would stay on for five years while Levy would remain in place for a shorter period. But he indicated that Omnicom had pushed for an outsized management role.

"This was a commitment that they made publicly to 60,000 people of Publicis," he told investors in a conference call. "I am 72 years old, so it's not a question of ego. I know that I have to go."

The companies said there would be no termination fees, and both CEOs said the companies shared no competitive information during negotiations.

During the conference call, Wren noted that he wrote to all of his major clients to inform them of the collapsed deal and said that the responses were all positive. He noted they recognized that it was better to terminate a deal than to "enter a bad marriage."

Omnicom said it would play catch up with its stock repurchase program, which was on hold during the merger talks. The company said that it was about $500 million to $750 million of share repurchases behind.

When asked whether Omnicom would try to do another deal of this size, Wren answered, "I think it will be a very long time before I do a merger of equals."

In a note to clients published Friday, David Reynolds, an analyst at Jefferies, wrote: "Firstly, one has to admire Levy and Wren for their grand designs, but ultimately their failure to execute, is well, just that, a failure."

________

D'Innocenzio contributed to this report in New York.

Follow Anne D'Innocenzio at http://www.Twitter.com/adinnocenzio

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