Publicis buys Epsilon for $4.4bn

Move to take Alliance Data's marketing business bolsters efforts by world's third-ranked advertiser to adapt to market increasingly driven by online client data

BERLIN, GERMANY - APRIL 04: A Litfass advertising column stands on April 04, 2019 in Berlin, Germany. Around 3,000 cylindrical concrete columns known as Litfasssaeule, or Litfass columns, named after Berlin printer Ernst Litfass, who invented them in 1885, are found around the German capital. Used since their creation as a space to display advertising, news from wars, local announcements and love messages, as well as serve as meeting points, the columns are beloved by many locals, including those behind a grassroots campaign trying to save them as the structures come under threat due to their gradual replacement by modern digital advertising signage. (Photo by Adam Berry/Getty Images)
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Publicis will pay $4.4 billion to acquire Alliance Data's Epsilon marketing unit, the French advertising group said on Sunday, expanding its digital business and North American footprint.

The deal announcement, two weeks after Publicis confirmed talks about the purchase, bolsters efforts by the world's third-ranked advertiser to adapt to a fast-changing market increasingly driven by online client data, Reuters said.

"The addition of Epsilon will propel Publicis as a leader of data-driven personalised experiences at scale," the Paris-based company said.

Publicis and other traditional advertisers have been losing ground in a marketplace increasingly dominated by Facebook, Google and digital marketing specialists that track and target individual clients via their smartphones.

The French group's shares sagged after a fourth-quarter earnings miss in February and have fallen 15 per cent in total over the past 12 months.

The Epsilon purchase is "a very significant investment for a company of our size", said Publicis chief executive Arthur Sadoun. "But we're convinced it's the right move ... in a world where data is at the heart of all decisions and the mobile phone has become our main interface."

Mr Sadoun has poured resources into what he calls “strategic game changers”, businesses that make better use of data and devise creative digital offerings for clients, according to Bloomberg. It already made one of the industry’s boldest bets on ad technology in 2015 with the $3.7bn purchase of Boston-based Sapient.

Epsilon, which brings a trove of data on some 160 million individual clients, generated revenue of $1.9bn last year, almost entirely in the United States.

The $4.4bn cash price amounts to $3.95bn excluding tax, or 8.2 times Epsilon's 2018 earnings before interest, tax, depreciation and amortisation (ebitda), Publicis said.

The French company said it would cancel a previously announced share buyback and finance the Epsilon deal with debt, adding that the acquisition would be earnings and cash flow-accretive from next year onwards.