CHICAGO — In a deal that would create the world's largest advertising company, Interpublic Group of Cos. is buying True North Communications Inc. for about $2 billion in stock.
The deal announced Monday lets New York-based Interpublic add the global agency network FCB Worldwide, one of the world's oldest advertising concerns, to its two global networks, McCann-Erickson WorldGroup and the Lowe Group.
Chicago-based True North is parent to the agencies Foote Cone & Belding, known for its dancing raisins ads for the California Raisin Advisory Board, and the Bozell Group, known for the "milk mustache" ads for the dairy industry.
There had been widespread speculation that True North would be acquired since it lost its biggest account, DaimlerChrysler, late last year.
The merger would create a company with offices in more than 130 countries and combined 2000 revenues of $7.2 billion.
The deal comes at a time when advertisers are looking to cut costs, with a bigger firm better able to offer a lower overall cost for advertising, media services and marketing.
Interpublic said it had identified $25 million in annual cost savings when the companies are combined, although it did not disclose details. Asked about layoffs, spokeswoman Susan Watson indicated that "some jobs may be lost" but not until at least the middle of this year.
Under terms of the deal, Interpublic will exchange 1.14 shares for each outstanding share of True North, which has about 51 million shares outstanding.
Executives of both companies said the two have similar management philosophies and combining will give their clients expanded service offerings.
"By joining our companies, we have advanced our ability to address client-led trends toward globalization and integrated marketing communications," said John Dooner, Interpublic's chairman and chief executive.
"Big is good," Brendan Ryan, CEO of FCB Worldwide, said on a conference call with analysts. "It's absolutely a can't-miss deal."
FCB and its clients, which include Coors Brewing Co., Kraft Foods Inc. and Quaker Oats Co., were said to be the key factor in Interpublic's willingness to swing the deal.
The company lost its long-standing DaimlerChrysler account last November to Omnicom's BBDO Worldwide.
True North's chairman and CEO, David Bell, will be vice chairman of Interpublic.
True North's main shareholder, French advertising group Publicis, said it will ask for more details before committing its 9 percent stake to Interpublic. It said the offer is at the bottom end of expectations.