French advertising firm Publicis Groupe announced yesterday it will acquire Digitas for $13.50/share ($1.3b in cash). Shares of both firms rose on the news, with Digitas' jumping 22%. Publicis CEO Maurice Levy is leading the firm on an acquisition growth strategy, with Digitas being its 11th deal this year. He commented, "We know this is the market of the future. The combination of Publicis and Digitas will make a world leader in digital marketing services." Levy expects the digital and interactive advertising market to grow 26% this year, compared to 5% growth for the overall advertising market. A Piper Jaffray analyst had positive comments on the deal, and said he sees the market growing 20%/year over the next five years. The boards of both firms unanimously approved the deal, which is expected to close as early as Jan. or Feb, depending on results of the cash tender offer. Digitas' CEO said Publicis' offer was the best among several inquiries, emphasizing cultural fit and worldwide growth opportunities. He will say on as an executive. Publicis expects Digitas to add about 4% to its operating margins in '07, and around 6% in '08.
• Sources: Press release (I, II) [pdf], Bloomberg
• Related commentary: Mark Cuban: Online Video Ad Market Will Collapse, Online Ads Steal the Show From Traditional Media, Headlines Aside, Internet Advertising Growth Has Stalled, U.S. Online Ad Revenue Sets New Record; Yahoo's Semel Feels Ad Growth Underestimated, Online Advertising Tops $4 Billion Per Quarter
• Potentially impacted stocks and ETFs: Digitas (OTC:DTAS), Publicis Groupe (NASDAQ:PUB)
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