UPDATE 2-Publicis pays $4.4 bln for Epsilon to extend digital reach

PARIS (Reuters) – Publicis will pay $4.4 billion to acquire Alliance Data’s Epsilon marketing unit, the French advertising group said on Sunday, expanding its digital business and North American footprint. The deal, announced two weeks after Publicis confirmed it was in talks with Alliance Data, bolsters efforts by the world’s third-ranked advertiser to adapt to a fast-changing market increasingly driven by online client data. “The addition of Epsilon will propel Publicis as a leader of data-driven personalized experiences at scale,” the Paris-based company said in a statement outlining its biggest ever acquisition – which tops the 3.7 billion euros ($4.18 billion) paid for tech consulting firm Sapient in 2014. Publicis and other traditional advertisers have lost ground in a marketplace increasingly dominated by Facebook, Alphabet’s Google and digital marketing specialists that track and target individual clients via their smartphones, while navigating tougher data-protection laws. The French group’s shares sagged after a fourth-quarter earnings miss and have fallen 15 percent in total over the past 12 months. CEO Arthur Sadoun warned in February of a further decline in first-quarter sales, to be published on April 17. The Epsilon purchase is “a very significant investment for a company of our size”, Sadoun said. “But we’re convinced it’s the right move … in a world where data is at the heart of all decisions and the mobile phone has become our main interface.” Epsilon, which brings a data trove on some 160 million individual clients, generated revenue of $1.9 billion last year, almost entirely in the United States. The $4.4 billion cash price amounts to $3.95 billion excluding tax, or 8.2 times Epsilon’s 2018 earnings before interest, tax, depreciation and amortization (EBITDA), Publicis said. The French company said it would cancel a previously announced share buyback and finance the Epsilon deal with debt, adding that the acquisition would be earnings- and cash flow-accretive from next year onwards.

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