Publicis Groupe has entered into an agreement with Alliance Data Systems Corporation 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 (left), 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”, he added.
Concluding, he said “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.”
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.
“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 (left), 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.
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.”
Epsilon is a high-profitle 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
Epsilon has built its assets in technology, data and platforms at an impressive scale
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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.”
He added, “In today’s fast changing environment, clients are shifting their investments towards data/technologydriven 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”.
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 trillon 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).
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.
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.
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