KEY TAKEAWAYS

Interpublic Group of Companies ( IPG ) shares surged 10% Monday after Omnicom Group ( OMC ) announced a deal to acquire its rival in an all-stock transaction that would form the world's largest advertising company.

The stock-for-stock transaction is expected to be tax-free for shareholders and set to close in the second half of 2025, with the combined company keeping the Omnicom name and trading under the OMC ticker symbol. The deal is also subject to approvals from Omnicom and Interpublic shareholders as well as regulators.

Interpublic shareholders will receive 0.344 Omnicom shares for each share of Interpublic common stock they own. When the deal closes, Omnicom shareholders will have 60.6% of the combined company and Interpublic shareholders will own 39.4%, on a fully diluted basis. Omnicom said the deal would result in annual cost synergies of $750 million.

Interpublic shares, which have lost around 10% in value this year, ended trading Friday at $29.26, giving the company a market value of almost $11 billion.

The deal values Interpublic at $13.25 billion, a spokesperson for Omnicom said.

Combined Omnicom and Interpublic Company Would Beat WPP in Revenue

A combined company would have annual net revenue of $25.6 billion, based on 2023 figures. WPP ( WPP ) currently is the largest advertising firm, with 2023 net revenue of about $15 billion.

Combined, 2023 revenue came 57% from the U.S. and 43% internationally.

John Wren, Chairman & CEO of Omnicom, will retain his roles if the deal is approved. Interpublic CEO Philippe Krakowsky  and Daryl Simm will be the new company's co-presidents and chief operating officers.

Omnicom shares, which have gained almost 20% year-to-date through Friday, fell 6% in intraday trading Monday.

Citi Says Deal 'Apt To Be Approved'

In a report Monday before the deal was announced, Citi said while investors may anticipate a regulatory roadblock for the deal, with the combined company controlling 48% of the U.S. market, there is plenty of competition with smaller agencies, tech firms, and consulting companies also in the market.

"While regulatory questions will certainly be raised, we believe this transaction is apt to be approved (if it is attempted)," the Citi analysts wrote, noting that "mergers among large agency holding companies are rare." .