Industry experts weigh in on Publicis' rumoured stake in Cheil

French conglomerate Publicis Groupe has weighed bid for a controlling stake in Samsung Group’s advertising agency Cheil Worldwide, Bloomberg reported. The Korean ad firm has a market value of US$1.9 billion.

Publicis is said to be considering a tender offer for about a 30% stake in Seoul-based Cheil Worldwide, which would make it the single largest shareholder in the agency, the article said. Samsung Electronics and engineering affiliate Samsung C&T Corp. own about 25% of Cheil Worldwide, according to data compiled by Bloomberg.

The French company aims to structure the potential transaction to ensure Cheil Worldwide continues handling Samsung Group advertising.

Publicis owns ad agencies including Leo Burnett and Saatchi & Saatchi. Its previous merger talks with Omnicom Group fell through in May 2014. Meanwhile in November 2014, Cheil signed a deal to acquire a significant piece of Iris Worldwide, with a view to increasing its stake to 100% over the next five years.

Marketing has reached out to Publicis for comments. A spokesperson for Cheil Worldwide told Marketing that the company does not comment on market speculations.

If successful, the acquisition will enable Publicis a strong foothold in Korea, further securing its relationship Samsung in the long run. As for Cheil, such a deal would provide a global network for the Seoul-based agency, known for handling Samsung ‘s advertising account.

TrinityP3’s managing director Darren Woolley told Marketing that Publicis’ offer was not unexpected: "In many ways it is no different to Interpublic Group buying Lintas in 2000. Many agencies that are established with either direct or indirect connections to a particular advertiser will invariably be bought by a holding company, either because it is good business to secure the clients of that agency in the short to medium term or because the agency is struggling with growth and the owners are looking for an option out.”

Woolley pointed out that the business move could be due to the recent initiative by the South Korean Government opening up its advertising market place to more international players. “South Korea has a number of agency and client arrangements and relationships similar to Cheil and it could be that we see these head in a similar direction with sales to one of the global holding groups,” Woolley added.

Meanwhile, Richard Bleasdale, managing partner, Asia Pacific, Roth Observatory International, views it as a smart but brave move by the French company, especially after a tough trading year in 2015 which also saw Publicis unveil a global restructuring of its organisation.

Bleasdale said, “The move is smart in that Publicis must solidify its global Samsung brand relationship - this move offers that potential and in fact the opportunity for considerable further growth with Samsung. Brave in that, Cheil has a fairly diverse ownership structure currently and is culturally very different to Publicis, so optimising the investment will not be easy.”

“In Publicis’s case though, fortune probably favours the brave.”