By Diane Bartz and Foo Yun Chee
WASHINGTON/BRUSSELS, July 29 (Reuters) - Publicis and Omnicom will most likely have to shed some assets inorder for their mega deal to win approval from regulators in theUnited States, Europe and 40 other countries where they operate.
The deal would combine the world No. 2 agency, Omnicom, withthe No. 3, Publicis, to create the world's largest agency. Thecompanies have expressed confidence that the transaction willmove forward.
Four antitrust enforcers polled by Reuters said they thoughtthe deal would be approved, but require some asset sales torestore competition, while three others were more cautious overthe regulatory outcome given the complexity of the deal.
Publicis Chief Maurice Levy defended the merger as necessaryin a changing, increasingly electronic landscape.
"This is a new company for a new world," Levy said. "It willbe able to face the exponential development of new Internetgiants like Facebook and Google, changing consumer behavior, theexplosion of big data, as well as handle the blurring of rolesof all the players in the market."
There are other large advertising firms. The current leaderis WPP, and there are three other major firms in theindustry - U.S.-based Interpublic, France's Havas and Japan's Dentsu, as well as many smalleroperations.
In Brussels, antitrust experts said the deal would bedifficult for enforcers to review.
"The companies claim to have complementarities, bothgeographically and in terms of activities. This might well betrue but there will be significant overlaps in many relevantmarkets," said Brussels-based antitrust lawyer Salomé Cisnal deUgarte of Mayer Brown.
"It remains to be seen how big the combined market sharesare and whether the European Commission can remedy potentialcompetition concerns by requesting divestments or behavioralcommitments," she said.
Brussels-based Jacquelyn MacLennan of White & Case LLP wasone of several antitrust experts who predicted one or moresegments of the companies could be sold off.
"This could be a tricky transaction for regulators. Thecompanies have so many wide-ranging activities. Every time thereis a mega-merger there are likely to be competition issues andthe Commission will be more cautious," said MacLennan.
Competition issues could focus on whether the companies arecompeting head to head in relevant national markets. "If thereare problems the parties may propose sell offs - such as certainlocal agencies for example," MacLennan said.
The new company - Publicis Omnicom - will be traded in NewYork and Paris. The company, which would have combined sales ofnearly $23 billion and some 130,000 employees, brings togetherPublicis brands such as Saatchi & Saatchi and Leo Burnett withOmnicom's BBDO Worldwide and DDB Worldwide.
Experts said the main competition issue is likely to be inmedia buying, which is where agencies purchase advertisements invarious formats - such as television or print - on behalf ofcustomers.
Pivotal Research analyst Brian Wieser estimated thatPublicis Omnicom would account for almost 20 percent of globalmedia spending and closer to 40 percent in the United States.
To allay such concerns, the companies might have to sellsmall brands in some countries, said a person close to thetalks.
A U.S.-based antitrust expert predicted the deal would winWashington's approval since it would leave large firms with asmaller U.S. presence - Havas and Dentsu - that could expand.
"The antitrust issues are being exaggerated and (thedeal)faces minimal risk," said the expert, who asked to speakprivately for business reasons. "It's not like AT&T andT-Mobile," he said, referring to the failed 2011 attempt tomerge the two telecom companies.
But he added winning antitrust approval from dozens ofcountries would be time-consuming, and that China was likely tobe the last to finish the process.
Evan Stewart, an antitrust expert with New York's ZuckermanSpaeder LLP, said that if the merger went forward and clientswere hurt, new agencies would rise up to compete.
"Somebody can set up a competing agency with six guys andgals in a garage. You don't need steel mills and iron ore boats.You don't need any of that stuff," he said. "I don't see anyantitrust issues; I don't see consumers being hurt here."
But Bert Foer, head of Washington, D.C.-based AmericanAntitrust Institute, said the vast combined company would havetoo many fingers in too many strategic business pies. Askedabout regulatory approval, he said: "I don't think they shouldget it."
WPP (WPP)
