Publicis in Talks With Alliance Over $5 Billion Epsilon Unit

(Bloomberg) -- Publicis Groupe SA is studying an acquisition of Alliance Data Systems Corp.'s Epsilon unit to push further into digital marketing in what would be the French advertising group's biggest takeover.

Epsilon has also attracted a joint offer from Advent International and Goldman Sachs Group Inc., people familiar with the matter said last week. Alliance may select a winner as early as this week in an auction that could fetch about $5 billion, the people said.

A takeover would bring Publicis more online data-mining expertise to help clients target shoppers more effectively and reduce its reliance on conventional advertising, which is in decline as consumers turn away from newspapers and traditional TV. Publicis shares fell the most in seven weeks as investors questioned its ability to integrate the business.

The share drop “reflects a lack of confidence in the ability of the ad-agency groups to make big M&A work,” said Matthew Bloxham, an analyst at Bloomberg Intelligence.

Read more: Alliance Data Unit Said to Draw Publicis, Goldman and Advent

Publicis Chief Executive Officer Arthur Sadoun has poured resources into what he calls “strategic game changers,” businesses that make better use of data and devise creative digital offerings for clients. It already made one of the industry's boldest bets on ad technology in 2015 with the $3.7 billion purchase of Boston-based Sapient.

There have been missteps along the way, with the group posting a loss in 2016 after writing down the value of one of its digital businesses.

Shares in the owner of Saatchi & Saatchi and Leo Burnett Worldwide fell 5.3 percent in Paris by 14:15 p.m., giving the company a market value of 10.6 billion euros ($11.9 billion).

Epsilon uses data to help its clients customize advertisements to their customers. Its services span from loyalty programs to email marketing and its digital arm, Conversant, collects consumer data including transactions, location and web activity. Alliance Data said in February it was weighing preliminary offers for the unit after announcing a review in November.

Publicis said in a statement Monday that talks are underway and there is no certainty a deal will happen if it decides to bid.

To contact the reporter on this story: Kim Robert McLaughlin in Stockholm at kmclaughlin6@bloomberg.net

To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net, Thomas Pfeiffer, Frank Connelly

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