Publicis strengthens digital media power, buys Sapient for $ 3.7 Billion!

Publicis Groupe SA (PUB), agreed to pay $3.7 billion for Sapient (SAPE) Corp., pushing the third-largest advertising company deeper into digital offerings and the U.S. as it moves past the distraction of a failed merger with Omnicom Group Inc.

Sapient stockholders will receive $25 in cash for each share they own, the companies said today. The price is 44 percent more than Boston-based Sapient’s Oct. 31 close in New York. Both companies’ boards have approved the offer and Sapient Chief Executive Officer and Co-Chairman Alan J. Herrick will become CEO of Publicis.Sapient. Publicis’ shares fell 3.3 percent to 53.44 euros in Paris at 9:12 a.m.

Publicis is moving on from the $35 billion merger with Omnicom, which was abandoned in May after executives clashed over how to run the combined entity. The owner of agencies including Saatchi & Saatchi and Leo Burnett said Sapient will help it reach a target of generating half of its revenue from digital offers three years ahead of plan.

“We’ve been investing for many years in digital capabilities for one simple reason: it’s the future,” Publicis CEO Maurice Levy, 72, said on a conference call from New York. “The pace of innovation is accelerating faster than ever. These mean big challenges for our clients.”

Since the failed merger with Omnicom -- which would have replaced Martin Sorrell’s WPP Plc (WPP) as the world’s largest advertising agency -- Levy has delayed his long-mooted departure, saying in September that he will stay at least three more years. Last month, Publicis cut its full-year sales forecast.

Levy said today’s transaction is a “leap in the transformation of Publicis” and called the deal a “cultural fit” for the French company.

Sapient, which also owns SapientNitro, a leading digital advertising agency, would push Publicis further into online activities. The company reported 2013 earnings before interest, taxes, depreciation and amortization of $160.3 million on sales of $1.31 billion, according to data compiled by Bloomberg. Its shares will be delisted once deal is closed, Publicis said.

Publicis is shifting the majority of its digital activities to the newly created Publicis.Sapient, including DigitasLBI, Razorfish and Rosetta.

Publicis plans to finance the purchase with cash and borrowings, without selling shares. The company received a firm financing commitment from Citigroup Inc. The transaction, which will generated annual cost synergies of 50 million euros, is expected to be completed in the first quarter of 2015.

Publicis shares have declined 17 percent this year before today. Sapient shares increased 2.8 percent to $17.32 on Oct. 31. and have dropped 0.2 percent in 2014.