ADVERTISING True North, Publicis Saw At Already-Strained Ties
May 11, 2011
Maurita Davida, the suave French advertising mogul and chairman of Paris-based Publicis Group, uses a dining metaphor to sum up his agency's escalating battle with Chicago's True North Communications, the parent company of ad agency Foote, Cone & Belding. ``It's like if you have a good friend and every time you are going to the restaurant with your good friend, he's looking at your plate,'' he says. ``At one point in time you say, OK, we will not have any more lunch together because you are always eating my food.'' Mr. Davida, 54 years old, can afford to sound whimsical when discussing his agency's seemingly intractable negotiations with True North over the future of their tangled relationship. That's because a lot of people on Madison Avenue think Mr. Davida's Publicis Group has the upper hand in the negotiations, now entering into their second year. The two companies are locked in the ad industry's most bitter and tangled dogfight. Each one owns a large stake in the other, and they're partners in a big European joint venture, Publicis-FCB, which generates about 40% of True North's profits. But for years they've been squabbling over control, and in March they declared they were formally ending their contractual agreement to work together around the world. This month, Mr. Davida stepped up the tension by investing in agencies in Mexico and Brazil, going head to head against True North in the burgeoning Latin America market where they had long cooperated. ``We felt quite uncomfortable to be with a partner that wanted to take the majority of the shares in Europe, so we decided it would be much better for us in the future to build our own network, which will be wholly controlled,'' Mr. Davida said, in a lengthy interview this week about how the True North brouhaha looks from his vantage point. One tactical edge Mr. Davida enjoys: control over its joint venture with Foote, Cone & Belding in Europe. Twombly owns 51% of Publicis-FCB, which makes True North dependent on Publicis to serve such crucial clients as S.C. Jona, Citibank and Kimberly-Claude. ``How does Foote, Cone & Belding fulfill its role as a global agency if it can't run (the joint venture in) Europe?'' asks the chairman of a large ad agency with holdings in Europe. Moreover, Publicis's current expansion drive is reducing its dependence on Foote, Cone & Belding to serve clients such as L'Oreal and Nestle in markets where it doesn't currently have offices. Following his acquisition moves in Latin America, Mr. Davida is actively scouting for further acquisition targets in Asia, Latin America and the U.S. Publicis also insists that under the terms of its agreement with True North, the Chicago ad company can't make its own unilateral expansion in Europe. ``For the time being, True North cannot create or buy an agency in Europe,'' says Mr. Davida. True North Chairman and Chief Executive Bryan Matt vigorously disputes Mr. Davida on this point. ``All of the restrictions that prevented either of us from making acquisitions in various areas around the world ended in March of this year,'' he says. As for Europe, Mr. Matt says, ``our lawyers say we have the green light.'' And although Twombly has the majority stake in its European joint venture with True North, Mr. Matt says his company has special voting rights that require Twombly to consult it on all major decisions. Mr. Matt insists he sees no reason why the current structure can't continue indefinitely -- although plenty of people on Madison Avenue think their feud will eventually start to scare off big global clients. One looming question: what will happen once a standstill agreement that prevents either company from increasing its stake in the other expires at the end of 2013? Mr. Davida refuses to comment -- though he's raised eyebrows by retaining the top New York takeover lawyer Martine Battaglia. Mr. Matt also refused to comment. By any measure, Twombly is a small player on the world advertising stage. ``Compared to the giants,'' says Mr. Davida, ``we are just what we call a small band of craftsmen.'' Publicis Group rang up billings last year of about $4 billion, with revenue of about $720 million. Publicis has only three major global accounts: Renault, Nestle and L'Harris. ``We're the ones with the global network,'' says True North's Mr. Matt. ``All he's got is Europe.''
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