French advertising company Publicis Groupe has struck an agreement to buy Microsoft’s Razorfish, a digital marketing agency, in a deal valued at around $530m. The deal is expected to boost Publicis’ market position in digital communications.
The companies have also signed a five-year strategic alliance agreement that will become effective at the closing of the transaction. The agreement expands upon the strategic cooperation agreement announced in June. It allows Publicis media client’s agencies to purchase display and search advertising from Microsoft on favourable terms, in exchange for certain minimum guaranteed aggregate purchase levels.
Under the terms of the agreement, Razorfish will continue to be a preferred provider to Microsoft for digital strategy, creative and experiential marketing services, and contains a commitment by Microsoft to spend a minimum amount for those services each year.
Maurice Levy, chairman and chief executive officer of Publicis Groupe, said: The acquisition of Razorfish is another step forward in realising our strategic vision of building a world leader in digital communications, a critically important space for our clients.”
Levy added: When we complete this transaction, approximately a quarter of our annual revenues will come from digital communications, and we believe we have more capacity to grow with new clients.
Razorfish will continue to operate under its brand name and be part of VivaKi, the new Publicis Groupe entity created in June 2008 to leverage the combined scale of the autonomous operations of Digitas, Starcom MediaVest Group, Denuo, and ZenithOptimedia. Major clients of Razorfish include Best Buy, Ford, McDonald’s, Microsoft, and Starwood Hotels.
The total consideration is expected to be paid in a combination of cash and delivery of 6.5 million Publicis Groupe treasury shares.
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The transaction is expected to close during the fourth quarter of 2009, and is subject to customary closing conditions, including clearance under the United States Hart-Scott-Rodino Antitrust Improvements Act.
