Japanese ad giant Dentsu enters Europe with Aegis

Japanese ad giant Dentsu enters Europe with Aegis
Updated 13 July 2012

Japanese ad giant Dentsu enters Europe with Aegis

Japanese ad giant Dentsu enters Europe with Aegis

Japanese ad giant Dentsu enters Europe with Aegis


LONDON: Japanese ad giant Dentsu is buying marketing group Aegis for 3.2 billion pounds ($ 5 billion), the biggest deal in its history as it seeks to expand outside its home market with the British firm’s European and digital business.
Revealing how badly Dentsu needs growth outside its shrinking home market, it will pay a 48 percent premium to secure the takeover after European groups WPP and Publicis snapped up rival agencies in recent years.
The price represents 20 times full year 2012 expected price earnings, compared with the 10-11 times at which WPP and Publicis trade, said analyst Ian Whittaker at Liberum Capital.
The deal means Japan is the second most active overseas acquirer this year with more than $ 20 billion worth of deals, behind the US but surpassing all major European nations and China in outbound M&A.
Analysts described the deal as a perfect strategic fit after Aegis Chief Executive Jerry Buhlmann turned the group around to grow in Asia Pacific, the US, emerging markets and digital marketing in recent years.
“The quality of the offer, the strong likelihood of deal certainty, the fact the offer was cash and the fact it was a meaningful serious approach meant that we entered bilateral discussions with them,” Buhlmann said of Dentsu’s approach.
Aegis, which has Coca-Cola, GM and Disney on its client list, has long been seen as a potential takeover target, although it had for years been linked to the French group Havas as French financier Vincent Bollore was the largest shareholder in both.
Aegis has performed strongly since selling its Synovate market research unit last year to focus on the faster growth areas of media buying and selling and digital communications.
In 2011, the group increased the proportion of its revenues from digital to a sector-leading 35 percent.
Analysts said the deal underlined the value present in advertising companies despite a tough economic climate and could lift the whole sector.
“We see the deal as underlining that the advertising sector still represents significant value,” Bernstein analyst Claudio Aspesi said.
“The premium paid by Dentsu suggests they are confident of continuing long term growth for Aegis, despite recent negative commentary on the outlook for the European ad market.”
For Dentsu, the deal enables it to find new growth outside its home market, which is eroding. Though the company dominates traditional Japanese print and broadcasting sectors, overall ad industry revenue fell 2.3 percent to 5.7 trillion yen ($ 72 billion) in 2011 — the fourth annual contraction for an industry that in the past decade has shrunk by almost 6 percent.
“Dentsu and Aegis will be the market leader in the Asia-Pacific region, enjoying a strong presence across Europe and the fastest growing agency network in the US,” President and CEO of Dentsu, Tadashi Ishii, said.
“In recent years, under the leadership of Jerry Buhlmann and his team, Aegis has been recognized as the most successful independent media and digital communications agency with strong performance momentum and talented, client-focused employees.”
Dentsu said it had already purchased or had irrevocable undertakings in relation to around 30 percent of Aegis’ stock, including shares from Bollore.
The Bollore group confirmed it had agreed to sell its 26.4 percent stake to Dentsu for 240 pence a share in a big payout for the group after it bought into Aegis in 2005.
Bollore will now have more capital to invest elsewhere, perhaps in his electric car battery project or in media-to-telecom group Vivendi where he is poised to take a 5 percent stake.
The deal comes months after Dentsu ended a nine-year alliance with Aegis’ European rival Publicis. The French company bought back a 9.1 percent stake held by Dentsu in February, leaving the Japanese group with the firepower to strike another deal in Europe, analysts said at the time.
“We at Aegis are delighted at the prospect of being able to play a full part in helping Dentsu create a platform for global growth and continued digital innovation,” Buhlmann said.
“By forming the first communications group with true global reach, the growth strategies of both businesses will be enhanced as we provide more scale, geography, capability and investment to support clients.”
Morgan Stanley advised Dentsu on the deal, while Greenhill and J.P. Morgan Cazenove advised Aegis.

Indonesia campaign helps SMEs enter Saudi market

Indonesia campaign helps SMEs enter Saudi market
Updated 40 min 16 sec ago

Indonesia campaign helps SMEs enter Saudi market

Indonesia campaign helps SMEs enter Saudi market
  • They will be the main target of the export initiative, which is estimated by the Indonesian Ministry of Trade to be able to generate $60 million

JAKARTA: Indonesia has launched a campaign to help small firms in the country compete for millions of dollars-worth of food trade in Saudi Arabia.

The government aims to help small and medium-sized enterprises (SMEs) improve the quality and competitiveness of their products to meet the Kingdom’s required standards, Indonesian trade and commerce officials have said.

Under normal circumstances, before the coronavirus disease (COVID-19) pandemic, around 1.5 million Indonesians a year make the pilgrimage to Saudi Arabia to perform Hajj and Umrah and hundreds of thousands work in the Kingdom.

They will be the main target of the export initiative, which is estimated by the Indonesian Ministry of Trade to be able to generate $60 million.

To meet the Saudi food regulator’s standards, the Indonesian Chamber of Commerce (Kadin), the Ministry of Trade, and the Ministry of Cooperatives and Small-Medium Enterprises have teamed up to assist SMEs in improving products such as bottled chili sauce, soya sauce, coffee, tea, and sugar that are in highest demand among Indonesians in Saudi Arabia.

Kadin chairman, Rosan Roeslani, told Arab News: “We have facilitated five small-medium enterprises that produce soya sauce to obtain Saudi Food and Drug Authority approval for distribution, while nine tea and coffee producers are in the pipeline to also obtain a license. We have also submitted the application for four bottled chili sauce producers.”

While travel and pilgrimage restrictions remain in place due to the COVID-19 outbreak, he said that the time before things get back to normal will be used to prepare the SMEs — which contribute 60 percent to the country’s gross domestic product and employ up to 90 percent of its workforce — for expansion into the Saudi market as soon as the pilgrimage sector resumes.

“We still have time to groom them as there are many aspects such as hygiene, and consistency in their product quality and quantity that they need to improve,” Roeslani added.

In 2014, the Ministry of Religious Affairs issued a regulation obliging catering companies that provided food and drink to Indonesian pilgrims in Saudi Arabia to source their products from Indonesian producers whenever possible.

Indonesia’s vice religious affairs minister, Zainut Tauhid Sa’adi, said that as each Indonesian pilgrim received food from caterers an average 75 times during his or her pilgrimage, demand was high but supply in Saudi Arabia remained limited and similar products from India and Thailand had been used instead.

Kasan Muhri, director general for export development at the Ministry of Trade, told Arab News that the program to prepare the SMEs had been in the making since 2017 and officials eventually decided to launch it this year despite the COVID-19 restrictions.

“Just because there are few Umrah pilgrims now and this year’s Hajj remains uncertain, it does not mean that the market is gone.

“People from around the world would still go to Saudi Arabia to perform the pilgrimage, not just Indonesians, so we are doing this to anticipate the market when the economy revives, and things are recovered. We don’t want to be left behind,” Muhri said.

Besides food and beverage products, officials say they are also looking into the possibility of exporting items such as goodie bags, prayer beads, and other pilgrimage accessories made by Indonesian SMEs.