Updated from 8:40 a.m. EDT
Ending months of on-again, off-again wrangling, British advertising titan
formally announced its plans to buy U.S. agency
Young & Rubicam
Friday, in a $4.7 billion deal that will create the world's largest advertising firm.
The all-stock deal will result in an split of about two-thirds of the combined company to WPP shareholders and one-third to Y&R shareholders.
The stock swap values each share of New York-based Y&R at $53.02, a 9.6% premium to its Thursday closing share price of $48.375. Under terms of the deal, Y&R shareholders can receive either 0.835 of a new WPP American depositor receipt, or 4.175 ordinary WPP shares, for each Y&R share.
The deal comes after months-old talks between the companies
broke down on May 1, but then
revived this week. French advertising firm
had emerged in the last few weeks as a potential Y&R suitor, but said Monday it had decided against making an offer for Y&R. Subsequent press reports that Publicis had been preparing a $65 to $75 a share stock and cash bid were
London-based WPP said it expects the marriage to save the companies in excess of $30 million a year, and anticipates the acquisition will add to earnings per share one year after completion, which is scheduled for the fall pending shareholder and regulatory approval.
The combined companies had pro-forma 1999 revenues of $5.2 billion and earnings before taxes and interest of $704 million.
WPP had originally planned for Thomas Bell, Y&R's president and chief executive, to become chairman of Y&R. But Bell said in a conference call Friday he plans to resign once the merger is complete. Y&R's board had offered to make the acquisition conditional on his employment in a job of his choice, but Bell declined.
"My mother used to say that two cooks spoil the broth," Bell said in a conference call, referring to himself and WPP chief executive Sir Martin Sorrell. Bell has been chief executive of Young & Rubicam for about four months. He initially opposed an acquisition by WPP, but later warmed to the deal.
Y&R's current vice chairman and chief financial officer, Mike Dolan, will become CEO of Y&R. Five Y&R directors will join the WPP board. A group of senior Y&R operating executives have signed agreements to stay with the company, and have committed not to sell two-thirds of their Y&R shares for one year.
A four-man transition committee consisting of Bell, Dolan, Sorrell and WPP Finance Director Paul Richardson will oversee the transition as Y&R becomes part of the WPP Group.
WPP Group, which acquired
Ogilvy & Mather
J. Walter Thompson
in hostile takeovers in the late 1980s, is currently the third-largest advertising holding company in the world, behind