Just Arrived | Dentsu all set to gobble Aegis Group!

Dentsu Inc (Head Office: Tokyo, Japan; President & CEO : Tadashi Ishii) ("Dentsu") has announce that it has agreed to proceed with a recommended cash acquisition of the entire issued and to be issued ordinary share capital of Aegis Group plc (Headquarters: London, UK; CEO: Jerry Buhlmann) ("Aegis"), to make it a wholly owned subsidiary of Dentsu (the "Transaction").

 

The Transaction is a friendly acquisition and the directors of Aegis intend to recommend it unanimously to their shareholders.

 

Dentsu has also made a formal announcement of the Transaction in London, on 12 July 2012 (7:10AM BST), in compliance with the local rules and regulations.

 

Dentsu announced its medium-term management plan "Dentsu Innovation 2013" in July 2009, focusing on global business expansion and intensifying digital offerings, together with further strengthening its mass media business, to drive its business strategy as one unified group and to achieve strong growth.

 

Looking to its clients' and media agencies' business landscape, Dentsu's business exposure has been expanding globally, especially with strong focus on emerging markets including Asia. This new environment represents an exciting opportunity for Dentsu, facing increasing client expectations for integrated services across all geographic regions and countries, as well as their integral service needs for complex and diverse businesses beyond the advertising and marketing areas.

 

Aegis, a global focused media and digital communications group with highly competitive digital service offerings, enjoys a strong presence across Europe and increasingly in the US, the world’s largest advertising market, and is rapidly growing its footprint across Asia and the Pacific. The combination of Dentsu and Aegis will be highly complementary, bringing together a global media platform with capabilities to provide integrated solutions, and offer enhanced quality services to clients.

 

It is important to note that Dentsu and Aegis share the same fundamental values, philosophy and strategic fit with each other, as this will enable them to build a unified network. Both companies place “client centricity” at the core of their values and Dentsu’s corporate vision for "Good Innovation." and Aegis’s to "Reinvent the Way Brands are Built" demonstrate both companies’ commitment to continuous improvement as well as also showing a strong strategic alignment in their focus on digital offering enhancement and global business expansion.

 

Dentsu and Aegis envisage that its cultural, visionary and strategic alignment will underpin future success for this transformational combination.

 

Dentsu believes that a business combination between Dentsu and Aegis will deliver the following strategic and financial benefits:

 

Expansion of global presence

The geographical fit between Dentsu and Aegis is highly complementary. Dentsu has a leading market position in Japan's advertising and marketing sector, an established presence across Asia, and an increasingly expanding business in the US, with mcgarrybowen as its core US subsidiary.

 

Additionally, Aegis enjoys a leading position showing strong presence across Europe and increasingly in the US. Moreover, Aegis is rapidly growing its footprint across emerging markets, and has established robust positioning in Asia excluding Japan.

 

Together, the enlarged group will be a stronger global competitor with the scope and scale to compete for and win international mandates across Japan, Europe, Asia Pacific and the Americas. The combined network with a full range of advertising, media and marketing services will enable Dentsu and Aegis to provide highly integrated services for local, regional and global clients across multiple international locations.

 

Enhanced service and integrated solution offerings

Dentsu and Aegis each rely, in order to be competitive, on distinct service offerings and expertise, together with their creativity and integrity, to exploit best solutions with a variety of service offerings.

 

Following the Transaction, the combined group will have a strengthened ability to offer a wider spectrum of niche services and expertise as a full service agency. With both Dentsu and Aegis's extensive experience and knowledge, the combined group will enhance its ability to offer integrated solutions to clients.

 

Intensified digital capabilities

The adoption of 'scaled' technologies by consumers has driven the proliferation of connected devices and advancements in communication technology, significantly affecting clients' advertising and marketing activities. Dentsu faces strong client expectations to strengthen digital solutions.

 

With the rise of digital consumption and client demand for digital services, Dentsu has successfully enhanced its digital solutions over the years. By integrating Aegis, with Isobar and iProspect's digital strengths in creative origination and performance marketing, the combined business will provide a powerful global platform for media, content and digital technology, and will increasingly support client activities.

(Note 1) Isobar, one of Aegis Group's agency brands, is the world's first global digital network and has strengths in digital marketing.

(Note 2) iProspect is one of Aegis Group's agency brands, has strengths in online solutions with an emphasis on search engine marketing.

 

The combination of Dentsu and Aegis, with its robust client portfolio, will count at least 71 out of the top 100 marketers as clients on a combined basis, and will provide global and local clients with a new, differentiated proposition to achieve their objectives, and also accelerate the drive to continuously create new innovations as one unified group.

 

Acquisition Price

Dentsu has offered an acquisition price of 240 pence (approximately JPY 300) for each ordinary share. The total acquisition price is expected to be approximately GBP 3,164 million (approximately JPY 395.5 billion).

(Note) FX rate : 1 GBP = 125 JPY

 

Transaction Method

The Transaction is planned to be implemented by means of a scheme of arrangement. A scheme of arrangement, in brief, is a process under English law for a recommended acquisition, conditional upon the approval of the target's shareholders, court approval and fulfillment of other conditions.

 

To become effective, the Transaction must be approved by a majority in number of Aegis’s shareholders (excluding Dentsu, which cannot vote its shares on the Transaction) representing 75% or more in value of the Aegis Shares voted. If approved by Aegis’s shareholders, the Transaction must also be sanctioned by the Court.

 

Through such procedures, the acquirer acquires 100% shares of the target from the existing target shareholders in exchange for the agreed consideration (i.e., if approved as above, the Transaction is then binding on all Aegis shareholders, whether or not they voted to approve the Transaction).

 

Dentsu has purchased approximately 14.999 per cent., and has entered into a conditional agreement to purchase up to a further 5.0 per cent. (combined with an irrevocable undertaking given until completion of the conditional purchase agreement), of the ordinary share capital of Aegis from the Bolloré Group, the largest shareholder of Gold. Dentsu has received irrevocable undertakings, in respect of a further 6.4 per cent. of the ordinary share capital of Aegis.

 

Dentsu has also received irrevocable undertakings from Aegis directors to vote in favour of the Transaction in respect of their Aegis Shares, representing, in aggregate, 4.1 per cent. of the ordinary share capital of Aegis.

 

Dentsu expects that the scheme of arrangement will become effective during October - December 2012, subject to anti-trust clearance and other conditions. Further schedules will be disclosed accordingly, once the details have been defined.

 

Financing

The Transaction will be funded through a combination of Dentsu's existing cash resources and loan facilities arranged for the purpose of the Offer.

 

Effect on our Performance

Dentsu will announce the specific effect of the Transaction on its performance in this fiscal year (ending March 31, 2013) at an appropriate time. Just for reference, Aegis’s contribution in net income on a pro-forma base of Dentsu group net income (JPY 29,573 million, fiscal year ended March 2012) and Aegis group net income (GBP 81.1 million, fiscal year ended December 2011), would be calculated as 25.5%.

(Note) FX rate : 1 GBP = 125 JPY

 

Dentsu President and CEO : Tadashi Ishii said “I am pleased to announce this exciting and transformational combination between Dentsu and Aegis. Together, we will be able to deliver fully integrated and best-in-class services to our clients through a new global communication network born in the digital age offering a broadened service portfolio. Dentsu and Aegis will be the market leader in the Asia-Pacific region, enjoying a strong presence across Europe and the fastest growing agency network in the US.”

 

“In recent years, under the leadership of Jerry Buhlmann and his team, Aegis has been recognised as the most successful independent media and digital communications agency with strong performance momentum and talented, client-focused employees. We look forward to working with our new colleagues with whom we already share a common “client-centric” philosophy. Jerry and I have huge ambitions for a truly client-focused global communication network built in the digital age, and are looking forward to further innovating our business and continuing to contribute to our clients’ success.”

 

Aegis CEO, Jerry Buhlmann said “This is a compelling combination of two great businesses that will create one of the world’s most dynamic marketing services groups – and the first to be born in the digital age.”

 

“We at Aegis are delighted at the prospect of being able to play a full part in helping Dentsu create a platform for global growth and continued digital innovation. By forming the first communications group with true global reach, the growth strategies of both businesses will be enhanced as we provide more scale, geography, capability and investment to support clients.”

 

“For the people of both these great businesses, the combination offers continuity and the promise of working for one of the most exciting, high-growth companies in our industry. We have complementary geographic fits and aligned visions and strategies. Together, we have strengthened investment capabilities as we work to help more clients than ever before navigate the complex and converging media ecosystem.”