Publicis Groupe to acquire US based Sapient for $3.7 billion

The French advertising company Publicis Groupe – the world’s third-largest ad agency – has announced it will acquire the US digital marketing company Sapient for $3.7 billion in an all-cash transaction.

The deal values Sapient at $25.00 per share, which is a 44 percent premium to Friday’s close.

Publicis said that the acquisition will allow the company to have a presence in new geographical markets as well as add new revenue streams through digital consultancy and e-commerce.

The company has experienced somewhat lackluster quarterly growth compared to rivals such as WPP and Interpublic. This deal is an effort to revitalize the company.

According to Publicis, the acquisition will create an “agency of the future”, with combined revenues of over €8 billion ($9.9 billion) and combined EBIDTA of around €1.3 billion ($1.6 billion).

Maurice Lévy, Chairman and CEO of Publicis Groupe, said:

“Sapient is a ‘crown jewel,’ a one of a kind company born in the technology space with strengths in marketing, communications, consulting and omni-channel commerce, all of which are equally important to best help clients achieve their digital transformation. It will also give Publicis Groupe access to new markets and 2/7creating new revenue streams.”

“This acquisition fulfills many of Publicis Groupe’s objectives: we will enhance our leadership position in digital, achieve our goal of deriving 50% of our revenues from digital and technology three years ahead of our 2018 plan, and leverage technology, consulting capabilities to expand in new verticals, and offering new and exciting opportunities to our talents.”

Alan J. Herrick, Sapient President, CEO and Co-Chairman, added:

“This transaction provides substantial value to our shareholders, offers an ideal cultural match for our people and provides an opportunity to share a wealth of new capabilities with our clients. The Sapient team has been on a 24-year journey building a company with the objective of creating significant impact for our clients and the industries in which they operate. With Publicis Groupe, we have found a partner that accelerates the level of transformation we can drive into the marketplace.”

Sapient posted $1.26 billion in revenue last year, a yearly increase of 12.3%. It reported 63 percent of 2013 sales in the North American ad market. The company’s clients include Fiat, Coca-Cola, Target, Unilever and Audi.

Charles Bedouelle, analyst at Exane BNP Paribas, told Reuters:

“It’s a good asset at a steep price, and will likely push back cash return story by two years.”

The transaction is expected to close in the first quarter of 2015.