Broker snap: Publicis-Omnicom merger positive for WPP, says Nomura

Nomura has maintained its 'buy' rating and 1,300p target price for advertising and media group WPP, saying that the tie-up of rival firms Publicis and Omnicom could be good for the UK-listed company.The $35bn merger between Publicis and Omnicom will hold the dominant positive in the creative and marking services industries with over 50% global market share, Nomura pointed out. However, the broker said there's nothing wrong with the number-two spot for WPP.Nomura reckons that the new merged company will have "less of an advantage in the field where scale matters, ie media buying"."With WPP maintaining a strong media buying position combined with the potential for clients wins arising, we believe the Publicis Omnicom deal may have more positives than negatives for WPP."The broker also addressed heightened industrial speculation regarding further agency consolidation on the back of the Publicis-Omnicom deal, following recent reports which have suggested a possible acquisition by WPP of the remaining 'Big Four' ad companies, Interpublic (IPG). Nomura said that while the Publicis-Omnicom deal was a merger of equals - "and therefore implied an acquisition price in line with current prices" - any deal by WPP to buy IPG likely require a substantial premium."Although an acquisition of IPG would allow WPP to regain its position as the largest agency by revenue, we view such a deal as unlikely given its dilutive impact to margins and earnings."The broker also cited a recent interview with WPP's Chief Executive Officer Sir Martin Sorrell in which he said he doesn't think it is necessary for more consolidation.WPP's share price was down 0.12% at 1,180.64p by 10:22 on Tuesday.BC