Publicis Buys Rosetta Marketing in $575M Deal

Aiming to boost its digital and interactive marketing services, advertising giant Publicis has agreed to pay at least $575 million to buy U.S.-based Rosetta Marketing Group, Reuters reported. The transaction is expected to close in the second or third quarter. Rosetta will be run as an autonomous brand within Publicis.

(Reuters) – Publicis (PUBP.PA), the world’s number three advertising group, has agreed to buy U.S.-based Rosetta Marketing Group for at least $575 million, to boost its digital and interactive marketing service offerings.

The French company’s acquisition comes as the growing popularity of Internet video and social media is boosting web display advertising, while traditional advertising in newspapers and magazines is slowing.

In addition to the initial transaction value, Rosetta’s manager-shareholders could receive a potential deferred payment in 2014 based on the agency’s performance between 2011 and 2013, Publicis said on Tuesday.

Details about the future payment as well as synergies that Publicis, which competes with WPP (WPP.L) and Omnicom (OMC.N), expects from the deal are expected to be given at a conference call later today.

Princeton-based Rosetta, which will become part of Publicis’s VivaKi digital arm, is expected to have annual revenue of nearly $250 million in 2011, with clients mainly in the healthcare, financial, retail and technology industries.

The acquisition is in line with Publicis’s target to raise its revenue derived from digital to 35 percent over the next three years, Publicis said, from 28 percent last year.

“Good timing (weak U.S. dollar) to further increase Publicis strength in the key U.S. digital market,” Exane BNP Paribas analyst Charles Bedouelle said in a research note, rating Publicis’s stock “outperform”.

He estimated Publicis would earn more than 31 percent of revenues from Digital in 2011.

The transaction is expected to close in the second or third quarter. Rosetta will be run as an autonomous brand within Publicis and under the leadership of founder and Chief Executive Chris Kuenne.

Publicis shares were down 0.1 percent at 38.445 euros at 0735 GMT. (By Caroline Jacobs, Editing by James Regan and Erica Billingham)