Publicis considering stake in Cheil

Cheil Worldwide, Samsung Group’s advertising agency, surged the most in more than two months during the day on the prospect of Publicis Groupe taking a stake in the company.

The French company is weighing a bid for a controlling stake in Cheil, people with knowledge of the matter said this week. Cheil shares closed 0.51 percent lower than the previous trade on Thursday, but earlier in the day it rose as much as 9.1 percent, the most intraday since Oct. 21.

Publicis is considering a tender offer for about a 30 percent stake in Seoul-based Cheil Worldwide, which would make it the single largest shareholder, one of the people said. Any deal would probably see Samsung Group keep a significant holding in Cheil Worldwide, which had a market value of $1.9 billion before today’s trading, the person said, asking not to be identified as the information is private.

Publicis, which owns ad agencies Leo Burnett and Saatchi & Saatchi, has struggled since a merger with Omnicom Group unraveled in May 2014. Last month, it lost most of the North American media business for Procter & Gamble, the world’s largest advertiser, as well as L’Oreal’s North American media planning and buying.

“Publicis has been distracted with acquisitions, while the main issue for them is defending and winning accounts,” Alex Wisch, an analyst with Bloomberg Intelligence, said by phone Wednesday. “It’s not the right timing or strategy at this stage.”

The French company wants to structure the potential transaction to ensure Cheil Worldwide continues handling Samsung Group advertising, according to the people. Samsung Electronics spent 2.73 trillion won ($2.3 billion) on advertising globally in the nine months through September 2015, according to a regulatory filing, which didn’t specify which agencies the expenditure benefited.

The deliberations are at an early stage, and Paris-based Publicis may decide against making an offer, the people said.

Samsung Electronics and engineering affiliate Samsung C&T own about 25 percent of Cheil Worldwide, according to data compiled by Bloomberg. Bloomberg