- Epsilon is a unique technology and
platforms company with unparalleled data assets built over
years.
- The addition of Epsilon will propel
Publicis as a leader of data-driven personalized experiences at
scale.
- Compelling transaction terms leading
to shareholder value creation:
- Net purchase price of $3.95 billion
after tax step-up, implying an 8.2x 2018 Adjusted EBITDA
multiple (1)
- Double-digit accretion to both
headline EPS and FCF per share (2) from
2020.
Regulatory News:
Publicis Groupe (Euronext Paris: FR0000130577, CAC
40) (Paris:PUB) today announced it has entered into an
agreement with Alliance Data Systems Corporation (NYSE: ADS) under
which Publicis Groupe will acquire Alliance Data’s Epsilon business
for a net purchase price of $3.95 billion after tax step-up (total
cash consideration of $4.40bn) and build a strategic partnership
with Alliance Data remaining business. This acquisition will
accelerate the implementation of Publicis’ strategy to become the
preferred transformation partner for its clients.
The Directoire (Management Board) and the Conseil de
Surveillance (Supervisory Board) of Publicis Groupe have
unanimously approved this transaction considering it a one-time
opportunity to seize, given the evolution of the industry and the
implying transformation of marketing solutions.
Arthur Sadoun, Chairman and CEO of Publicis Groupe,
said:
“Our clients are facing increasing pressure from the rise in
consumer expectations, the mainstreaming of direct-to-consumer
brands and new data regulations. The only response is to deliver
personalized experiences at scale. They have to transform to meet
this new market imperative.
With the acquisition of Epsilon, Publicis Groupe is bringing the
necessary technology, expertise and the talent to complement our
offer in creativity, media and business transformation, and help
our clients leapfrog their competition and grow profitably.
In 2018 with an unprecedented run of major New Business wins, we
demonstrated that we have the right model to be the preferred
partner of our clients in their transformation. This acquisition
will accelerate its implementation, turbo-charge our game changers
and help us grow faster by offering an even more end-to-end
solution to our clients.
With this critical move, we are going further, faster and deeper
in our own transformation, becoming a leader in this data-led,
digital-first world. It’s a one-time opportunity, with very
compelling financial terms and delivering double-digit accretion of
Headline EPS and Free Cash Flow from Year 1 (2020).
We are thrilled to welcome Epsilon’s remarkable teams and look
forward to working together for our clients and growing our
relationship with Alliance Data.”
Edward J. Heffernan, Alliance Data Systems’ President and
CEO, said:
“I’m pleased to say today’s announcement represents a trifecta
win for Alliance Data, Epsilon and Publicis Groupe. The
announcement of this transaction represents the culmination of an
extensive assessment of strategic options for our Epsilon business.
With this transaction, we have found what we believe to be the
right home for Epsilon’s technology, data assets and
associates.
Publicis Groupe will be the ideal cultural and strategic fit for
Epsilon and its Conversant business, and will help drive Publicis
Groupe’s own transformation in today’s data-driven digital
world.
Furthermore, the unique relationships that have been cultivated
between Epsilon and our other Alliance Data businesses will remain
intact, and we look forward to working with Publicis Groupe to
develop an even broader relationship promoting mutual and
sustainable growth going forward.”
Maurice Lévy, Chairman of the Supervisory Board of
Publicis, said:
“The Conseil de Surveillance has thoroughly and carefully
reviewed this transaction and has approved it unanimously
considering that it would be good for all stakeholders.
For the clients: it will accelerate the transformation of
Publicis making it a more relevant and more competitive
partner.
For the talents: in a highly competitive environment for
talents, Publicis will be in a position to benefit from a
remarkable leadership team, 3 700 data scientists and great
technology teams and artificial intelligence experts.
For our shareholders: the transaction, which was not planned,
has great merits from a financial point of view. The price is fair,
the transaction is headline EPS and Free Cash Flow accretive at
double digit level, it gives a stronger profile of growth and a new
and better balanced mix of product and revenues. Therefore, it will
generate value creation that will greatly benefit our
shareholders.
The Conseil de Surveillance has been convinced by the approach
of the Directoire and its Chairman and CEO, Arthur Sadoun, on the
integration. The plan is reasonable and should lead to a seamless
integration with great potential in growth and cost synergies. We
are confident that the plan will deliver the expected results on
services, growth and synergies.”
Epsilon: a technology leader maximizing
the value of its clients’ data at scale
Headquartered in the US, Epsilon is a unique technology and
platform company focusing on maximizing the value of its clients’
data. In 2018, Epsilon generated $1.9 billion of net revenue (3),
97% in the United States. Epsilon employs approximately 9,000
employees, including 3,700 data scientists and 2,000
Bangalore-based technology delivery experts.
Epsilon’s expertise spans across the entire data lifecycle from
client’s first-party raw data to personalized marketing campaigns,
using technology, data and platforms to:
- Onboard client first-party data
using Epsilon’s proprietary software suite (CRM, email and loyalty
programs) to create a clean, normalized and organized data set
- Enrich client’s first-party data
with Epsilon proprietary data assets (demographic and contact,
behavioral and transactional, online and offline data)
- Build unique ID customer
profiles based on enriched data and Artificial Intelligence for
segmentation and analytics
- Activate data to deliver
personalized multichannel campaigns at scale with measurement and
real-time optimization
Epsilon’s success is evidenced by the endorsement of its blue
chip clients:
- Epsilon has gained the trust of at
least 7 out of the 10 largest US companies across various sectors
including Auto, Retail, Financial Services, CPG and Media
- In addition, its top 50 clients have an
average tenure of 14 years and have generated an 8% yearly growth
on average over the last two years, demonstrating the significant
client benefits delivered by Epsilon.
Epsilon has built its assets in technology, data and platforms
at an impressive scale. For example, its loyalty software serves
600 million accounts, it has more than 250 million unique consumers
identified in the US, and its proprietary platforms Conversant
handle 1 billion updates every 5 minutes allowing to further
improve messaging based on consumer insights on a real time
basis.
Epsilon has developed extremely strong artificial intelligence
capabilities allowing consumer behavior predictions.
In a world where data privacy is paramount, Epsilon remains at
the forefront of consumer privacy, cybersecurity and risk
management compliance matters.
Bryan Kennedy, CEO of Epsilon, said:
“We are thrilled to join the Publicis Groupe family. During
extensive discussions with the Publicis leadership team during the
recent review process, we found powerful common ground, including
shared values and a strong vision for the future of data-driven,
digital-first marketing.
Our discussions illuminated the unmistakable market opportunity
that combining our complementary offerings would represent. I
strongly believe that joining Publicis will benefit Epsilon and
Conversant’s people and bring great value and new opportunity to
the clients we serve.”
An acceleration of Publicis strategy to
become the preferred partner to clients in their
transformation
In today’s fast changing environment, clients are shifting their
investments towards data/technology-driven marketing solutions
which allow them to foster customer engagement, support growth and
reduce costs.
Publicis has set a clear ambition to combine creativity, data
and technology to address its clients’ needs and become a leader in
marketing and business transformation. This model has been gaining
momentum as exemplified by Publicis Groupe’s #1 position in New
Business ranking in 2018 and the growth of its “Game Changers”.
Today, the acquisition of Epsilon is a one-time opportunity to
accelerate the implementation of Publicis’ strategy to deliver
personalized experience at scale.
With Epsilon at the core, Publicis will become the first player
to offer a unique end-to-end services to its clients. It will
result in enhanced growth of its existing businesses while opening
up new opportunities in an enlarged $1.5 trillion industry.
Epsilon will fuel the entire Publicis organization,
complementing its existing Solutions and boosting its Game
Changers:
- On the creative side, Epsilon assets
will bring customer insights to improve ideation and build more
relevant campaigns. By powering the Dynamic Creative Engine,
Publicis will go one step further to adapt to real time context of
customers (who they are, what they do, what they buy)
- On the media side, the connection
between Epsilon’s data sets and Publicis Media’s billions of
touchpoints will provide superior intelligence to build consumer
IDs, segment audiences and maximize media buying ROI by accurately
measuring and optimizing campaigns in real time
- On the Digital Business Transformation
side, Epsilon will allow Publicis to deliver deep proprietary
customer insights to further optimize clients’ business model
Conversely, Epsilon’s potential will be fully unlocked within
Publicis Groupe, thanks to well identified value creation levers.
In particular, Epsilon will benefit from Publicis’ client portfolio
and global reach to expand further in the U.S. and overseas.
Publicis also intends to replicate the success of Epsilon’s unique
Auto platform to other verticals (such as Health, Financial
Services, Telecommunications, Retail).
Compelling transaction terms with
attractive shareholder value creation
Under the terms of the agreed transaction, Publicis Groupe will
acquire Epsilon for a cash consideration of $4.40 billion,
representing a net purchase price of $3.95 billion after deducting
the benefit of acquisition-related tax step-up. This implies an
8.2x multiple, based on a 2018 Adjusted EBITDA (1) of $485m.
The transaction will be double digit accretive to Publicis’
headline EPS and Free Cash Flow per share (2) from year one (2020).
As an illustration, based on 2018 Pro-Forma figures, headline EPS
accretion would equal +12.5% (4) and FCF accretion +16.5% (5),
excluding any transaction-related synergies.
Publicis remains committed to its 45% dividend payout ratio and
will put on hold its share repurchase program in the context of
this acquisition.
The transaction will be fully financed with debt and cash on
hand, maintaining a financial profile in line with current BBB+ /
Baa2 ratings, with full deleveraging four years after completion of
the transaction.
The transaction remains subject to customary approvals and is
expected to close in Q3 2019.
Advisors
Allen & Company LLC, BNP Paribas, Citi and J.P. Morgan acted
as financial advisors and Wachtell, Lipton, Rosen & Katz is
serving as legal advisor to Publicis Groupe.
Conference calls
On Monday, April 15, 2019, at 8:00 AM CET/2:00 AM ET and at 2:00
PM CET/8:00 AM ET, Publicis Groupe and Epsilon will host webcast
presentations to discuss the transaction. Links to the webcast and
accompanying documents will be available on Publicis Groupe’s
Investor Relations website.
This press release contains inside information within the
meaning of Article 7 of Regulation (EU) N° 596/2014
About Publicis Groupe - The Power of One
Publicis Groupe (Euronext Paris FR0000130577, CAC 40) is a
global leader in marketing, communication, and digital
transformation, driven through the alchemy of creativity and
technology. Publicis Groupe offers its clients seamless access to
its tools and expertise through modular offering. Publicis Groupe
is organized across four Solutions hubs: Publicis
Communications (Publicis Worldwide, Saatchi & Saatchi, Leo
Burnett, BBH, Marcel, Fallon, MSL, Prodigious), Publicis
Media (Starcom, Zenith, Spark Foundry, Blue 449, Performics,
Digitas), Publicis Sapient and Publicis Health. Present
in over 100 countries, Publicis Groupe employs nearly 75,000
professionals.
www.publicisgroupe.com | Twitter:@PublicisGroupe | Facebook
| LinkedIn | YouTube | Viva la Difference!
Disclaimer
Certain information contained in this document, other than
historical information, may constitute forward-looking statements
or unaudited financial forecasts. These forward-looking statements
and forecasts are subject to risks and uncertainties that could
cause actual results to differ materially from those projected.
These forward-looking statements and forecasts are presented as at
the date of this document and, other than as required by applicable
law, Publicis Groupe does not assume any obligation to update them
to reflect new information or events or for any other reason.
Publicis Groupe urges you carefully to consider the risk factors
that may affect its business, as set out in the Registration
Document filed with the French Autorité des Marchés Financiers
(AMF) and which is available on the website of Publicis Groupe
(www.publicisgroupe.com), including an unfavorable economic
climate, an extremely competitive market sector, the possibility
that our clients could seek to terminate their contracts with us at
short notice, the fact that a substantial part of the Group’s
revenue is derived from certain key clients, conflicts of interest
between advertisers active in the same sector, the Group’s
dependence on its directors and employees, laws and regulations
which apply to the Group’s business, legal action brought against
the Group based on allegations that certain of the Group’s
commercials are deceptive or misleading or that the products of
certain clients are defective, the strategy of growing through
acquisitions, the depreciation of goodwill and assets listed on the
Group’s balance sheet, the Group’s presence in emerging markets,
exposure to liquidity risk, a drop in the Group’s credit rating and
exposure to the risks of financial markets.
1. 2018 reported Epsilon EBITDA adjusted for standalone
carve out costs of €21m, share based compensation charge of €30m to
align with Publicis’ accounting policy, €60m of run rate cost
reductions being implemented at Epsilon and before any potential
cost synergies derived from this transaction. Conversion from € to
$ at the 2018 average exchange rate of 1.18. 2. Headline EPS and
FCF on a fully diluted basis. 3. As per Publicis Groupe accounting
principles 4. EPS adjusted for stand-alone carve-out costs and the
run rate cost reductions being implemented at Epsilon 5. FCF per
share reflecting above adjustments, as well as yearly tax step-up
effect
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version on businesswire.com: https://www.businesswire.com/news/home/20190414005023/en/
Clément Leonarduzzi,Corporate Communications+ 33 (0) 6 79 27 47
31clement.leonarduzzi@publicisconsultants.com
Sabrina Pittea / Karen LimCorporate Communications+ 33 (0)1 44
43 76 91 / 78 61sabrina.pittea@publicisgroupe.com
Alessandra GirolamiInvestor Relations+ 33 (0)1 44 43 77
88alessandra.girolami@publicisgroupe.com
Chi-Chung LoInvestor Relations+ 33 (0)1 44 43 66
69chi-chung.lo@publicisgroupe.com
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