Dec 22, 2006 6:04 AM, PROMO Xtra, By Betsy Spethmann

Levy

Publicis Groupe will take a giant step into digital marketing when it buys Digitas Inc. for $1.3 billion.

Shareholders of both agencies have already approved Publicis' plan to buy Digitas  for $1.3 billion. The deal is expected to close as early as February 2007, and includes Digitas’ three divisions: Boston shop Digitas, Modem Media, and Medical Broadcasting LLC.

The purchase gives Publicis Groupe an immediate advantage in interactive marketing, one of the fastest-growing marketing services. Publicis projects that digital and interactive marketing will account for 10% of total marketing spending worldwide by 2010.

The network already has a small U.S. footprint in the discipline, with digital capabilities at promo shop Arc Worldwide and at Market Forward, both Chicago. Digitas, with an estimated $252 million in net revenue, will boost Publicis’ full revenues from digital and interactive marketing to about $810 million. That’s 15% of Publicis’ total annual revenues of $5.4 billion. The increase in digital work also pushes marketing services to 34% of Publicis’ total revenue, up from 28% now.

“We have been seeking to make an important strategic acquisition which could really boost our presence in the digital marketplace. The acquisition of Digitas Inc. allows us to immediately attain our goal of being one step closer to the future,” said Publicis CEO Maurice Levy in a statement.

For Digitas, the deal provides a platform for global expansion, something Digitas CEO David Kenny has wanted to do for some time. Publicis’ offices globally will offer Digitas’ services to clients.

Kenny remains at the helm of the agency, which keeps its name. Kenny also takes charge of interactive and digital strategy for the full Publicis network, and joins the holding company’s executive committee.

Both Levy and Kenny commented on the impact the merger will have on retaining top talent. Levy said Digitas’ training programs for its 2,050 staffers will help Publicis recruit and train top digital and interactive talent. Kenny complimented Publicis’ own infrastructure: “The way the Groupe grooms, develops and manages talent is extremely impressive. Our people will discover new and greater professional opportunities.”

The purchase follows some major reshuffling at Publicis earlier this month, when Arc was merged into ad agency Leo Burnett Worldwide (PROMO Xtra, Dec. 13, 2006). There’s no word yet whether Publicis will align Digitas with one of its ad agencies. Digitas already handles direct marketing and promotions, primarily data-based acquisition and loyalty work, for clients including American Express, AT&T, Celebrity Cruise Lines, General Motors, Gillette, KitchenAid and Pfizer.

Digitas ranked No. 6 in the 2006 PROMO 100 with estimated net revenues of $252 million for 2005, up an estimated 22% from 2003.

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