PARIS (The Deal) -- Advertising heavyweights Omnicom Group (OMC) and Publicis Groupe SA have abandoned their $36.1 billion merger, blaming obstacles that had slowed the progress of the deal and damaged both groups' operations.
"The challenges that still remained to be overcome, in addition to the slow pace of progress, created a level of uncertainty detrimental to the interests of both groups and their employees, clients and shareholders," Omnicom CEO John Wren and Publicis Chairman and CEO Maurice Levy said in a joint statement. "We have thus jointly decided to proceed along our independent paths."
The decision comes after Wren warned last month that regulatory delays threatened to prolong the merger process beyond acceptable limits. It also reflects a mounting clash of cultures that had derailed integration and delayed key management appointments.
"We suspect the deal fell apart over management issues (and in particular the appointment of the CFO) rather than tax issues," noted Sanford C. Bernstein & Co.'s London based analyst Claudio Aspesi. "This is a setback for Publicis...the rationale of building up financial scale in the face of technology was sound."
On a conference call, Wren seemed to concur with that view: "We knew there would be differences ... but I know now that we underestimated the [corporate] cultural differences," he said. "We believed we would finish this in six months and here we are nine months later with a lot of issues and there is no finish line in site and that is not healthy for anyone."