By Ruth Bender
PARIS--Publicis Groupe SA (PUB.FR) Wednesday joined its future partner Omnicom Group Inc. (OMC) in reassuring investors that the proposed merger of the two groups is running on schedule as the French ad giant posted lower-than-expected third-quarter sales.
"So far we have not encountered a major barrier," Chief Executive Maurice Levy said.
Publicis and Omnicom need to get approval from antitrust authorities in over 40 markets before they can go ahead with plans to merge the two groups into the world's largest advertising holding company, bringing some of Madison Avenue's best-known agencies under one roof.
After Omnicom Tuesday said the group had already received clearance in South Africa and South Korea, Mr. Levy said the dialogue with European antitrust authorities over the merger plans was "going well."
The firms are on track to close the deal in the first quarter of next year, Mr. Levy said.
Mr. Levy said he spent his summer talking to clients, who were all supportive of the deal, responding to concerns voiced by analysts and rivals that the merger could lead to possible losses in clients as a firm may not like to see its competitor with the same advertising holding company when merged.
"I think the risks have been exaggerated," Mr. Levy said.
Mr. Levy said the aim was for the merged group--to be named Publicis Omnicom Group--to post organic revenue higher than what each group would have posted on its own, by complementing its expertise, notably in digital.
Publicis said organic revenue growth--a key metric in the ad industry that strips out acquisitions and currency shifts--was 3.5% in the third quarter, down sequentially from the second quarter, as slower growth in markets such as China and Brazil dented strong growth in the U.S. and an improvement in Europe.
Publicis said the sales figure was "in line with internal forecasts," but it fell slightly short of some analyst expectations. Kepler Cheuvreux had expected organic growth of 4.5% for the quarter, while Exane and Oddo tabled on 4.3% growth. Omnicom reported a 4.1% increase in organic revenue in the same period.
Emerging markets posted organic revenue growth of 1.5%, due notably to a "temporary" slowdown in greater China and economic difficulties in India.
"We had expected a pickup in China in September but we have not seen it yet," Mr. Levy said.
The CEO said the group expects emerging markets to return to stronger growth next year.
In Europe--where advertising agencies have been hurting from firms cutting back on advertising spending during the crisis--organic revenue growth rose 0.4%, driven by strong growth in the U.K. and Northern markets, while France and Southern Europe remained in the red. "We are still cautious, it's a slight improvement," said Mr. Levy.
Publicis said it still aims to achieve organic revenue growth of around 3.5% to 3.6% this year and improve its margin slightly.
Overall third-quarter sales rose 3% to EUR1.68 billion from EUR1.63 billion in the same period last year, as unfavorable currency swings weighed on numbers. The company doesn't break out profits for the quarter.
Rival WPP PLC (WPPGY, WPP.LN) reports third-quarter sales on Oct. 24.
Write to Ruth Bender at firstname.lastname@example.org
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(END) Dow Jones Newswires
October 16, 2013 01:44 ET (05:44 GMT)Copyright (c) 2013 Dow Jones & Company, Inc.
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