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* Merger delayed by tax, regulatory approvals
* Publicis, Omnicom lost a string of contracts in April
* Big Samsung contract also under review
* Rivals seek to poach firms' top talent
By Kate Holton, Jennifer Saba and Leila Abboud
LONDON/NEW YORK/PARIS, May 1 (Reuters) - Publicis and Omnicom have lost more than $1.5 billion of clientwork in recent weeks and face a fight to retain billions more,including a huge Samsung contract, just as the two advertisingfirms struggle to keep their merger on track.
When the world's second and third-largest ad groupsannounced a merger last July, it sparked talk from rivals, ledby Martin Sorrell, the boss of current leader London-based WPP, that the U.S. and French firms could lose clients andtalented staff as a result.
Now, with the deal's closing delayed at least six monthsbecause of regulatory issues, and relations so tense between thetwo that they haven't been able to solve a seven-month disputeover who becomes new finance chief, Sorrell has been boastingabout being successful in winning business from them andpoaching their staff.
Several large contracts, including Vodafone's $1billion global media and buying account, moved hands fromOmnicom to WPP in April.
On Wednesday, Microsoft announced it was moving itsmultibillion-dollar ad and media business from Publicis and WPPto Japan's Dentsu Aegis and U.S. Interpublic.Others to move away from Publicis or Omnicom in recent weeksinclude food maker Danone, pharma group GSK, electronics firmSony, and retailer Marks & Spencer.
In the ad business, accounts do change hands quite regularly- in the case of some companies every few years - and there areoften reviews and pitches for the business when contracts cometo the end of their terms. Also, none of the clients who havejumped ship have publicly blamed the merger.
Omnicom CFO Randall Weisenburger noted on an earnings calllast week that swings in the business, such as the Vodafoneloss, are quite normal. "Each quarter you get one or two bigwins or one or two big losses," he said.
And the wins are not all in WPP's favour. Publicis prevailedagainst WPP on a contract with food company ConAgra in Februaryand its BBH agency expanded its role with British Airways at theexpense of WPP's Ogilvy in March.
Nevertheless Publicis and Omnicom face the unenviable taskof defending contracts, including the multibillion dollaraccount of tech giant Samsung and the U.S. accountof the leading brewer Anheuser-Busch InBev, maker ofBudweiser beer, amid questions about whether the merger planwill fall apart.
Among any client's biggest concerns will be whether they getthe attention and quality of service they want from staff andmanagement who will be wondering if the merger will happen andwhat lies ahead for them whether it goes ahead or not. Criticalis whether there will be changes in the ad agency teams theywork with, consultants, analysts, and rival ad executives said.
"There is more than $4 billion in review for the combinedcompany counting major accounts like Samsung that could changehands," Pivotal Research analyst Brian Wieser said.
"Publicis and Omnicom lost contracts worth $1.5 billion fromfour accounts in one week in April," he said. "It's somewhat badluck on timing, but does raise some questions as to if it's morethan bad luck."
CHAMPAGNE TOASTS
As they feted the deal signing with champagne in Paris lastsummer, Omnicom CEO 's John Wren and Publicis' CEO Maurice Levysaid their "merger of equals" would enable them to bettercompete with the likes of Google and Facebook who dominate the digital ad space, which accounts for nearly aquarter of global marketing spend.
Greater scale was supposed to give the new group betterbargaining power in buying space for ads on TV, the web, andprint at a time when many global brands are looking to cut costson advertising.
But uncertainty over the deal grew last week after the twoCEOs gave different reasons for the closing's delay.
The deal still requires various regulatory approvals,including antitrust approval in China, and agreement fromEuropean authorities to a structure that would see the mergedcompany have its domicile in the Netherlands and tax residencyin the UK.
The two sides are also locked in a dispute over who shouldbe chief financial officer. Whoever takes the CFO role willdetermine how the new company will operate, hewing either to Publicis' centralized structure or Omnicom's less controllingapproach to subsidiaries.
Still, some experts said that the merger of the two holdingcompanies wasn't a big issue for many clients.
Judy Neer, president and CEO of Pile and Company, aconsulting firm that helps companies with their marketingrelationships, said many of her clients weren't concerned aboutthe merger provided it didn't impact the specific ad agencysubsidiaries they deal with.
One insider at Omnicom acknowledged that the deal had notbeen useful as a tool to recruit clients, but nor were clientsciting it as a reason for reviewing contracts either.
A person familiar with the thinking of one big consumerbrand which recently moved its global account from Publicis toWPP said it had not been put off by the merger, but that WPP hadoffered more attractive and efficient terms.
Another person at a multinational which recently moved itsmedia buying account from Omnicom to WPP, said Omnicom had inrecent months failed to maintain the relationship, that WPP wasbetter in certain areas including digital, and that the companycouldn't see the benefits to the Omnicom-Publicis merger.
"No one explained what synergies were in it for us," theperson said.
POACHING TALENT
One of the biggest accounts to come up for grabs in recentyears is the creative, digital and media business of SamsungElectronics. Starcom MediaVest Group and Leo Burnett, units ofPublicis, currently have much of the work with other agenciesdoing parts.
According to Ad Age, Samsung spent $4.35 billion on advertising in 2012. Exane BNP analyst Charles Bedouelle said the account could be worth around 2 percent of Publicis revenuesand said the review indicates how big companies areconsolidating their work across countries and sectors as theylook to save on costs. "WPP excels at this game," he said citingthe firm's size and structure.
Other battlegrounds expected include Spain's Telefonica, which is reviewing some $300 million in advertisingcontracts, most of which are now with Publicis.
WPP had the highest rate of comparable revenue growth of thebig four agencies in the first quarter, with the fourth-largestIPG in second place, Omnicom third and Publicis fourth.
Retaining talent is also a worry for Publicis and Omnicom.
WPP's Sorrell has said that for every one member of staff hehas lost to the merging group, his firm has attracted four inreturn. Both IPG boss Michael Roth and Yannick Bollore, head ofthe fifth-biggest ad group Havas, said they had seenopportunities to lure staff away from the two. Havas recentlywon an account from Gulf airline Emirates from Publicis.
"Six months ago or four months ago, I was receiving resumesfrom young executives," Bollore told an analyst conference callon March 20. "Now for the last two or three weeks, I don't knowif something happened inside Publicis-Omnicom, but I'm startingto receive some resumes from very high senior managers."
Still Omnicom's Wren said on the firm's earnings call lastweek that its talent base is "very stable" and pointed to arecent big hire: Peter Sherman, Omnicom's new executive vicepresident, who left WPP'S JWT Worldwide. (Editing by Martin Howell)
