By Laurence Frost and Gwénaëlle Barzic
PARIS (Reuters) - Publicis will pay $4.4 billion to acquire Alliance Data's Epsilon marketing unit, the French advertising group said on Sunday, expanding its digital business and North American footprint.
The deal, announced two weeks after Publicis confirmed it was in talks with Alliance Data, bolsters efforts by the world's third-ranked advertiser to adapt to a fast-changing market increasingly driven by online client data.
"The addition of Epsilon will propel Publicis as a leader of data-driven personalized experiences at scale," the Paris-based company said in a statement outlining its biggest ever acquisition - which tops the 3.7 billion euros ($4.18 billion) paid for tech consulting firm Sapient in 2014.
Publicis and other traditional advertisers have lost ground in a marketplace increasingly dominated by Facebook (NASDAQ:FB), Alphabet's Google (NASDAQ:GOOGL) and digital marketing specialists that track and target individual clients via their smartphones, while navigating tougher data-protection laws.
The French group's shares sagged after a fourth-quarter earnings miss and have fallen 15 percent in total over the past 12 months.
The Epsilon purchase is "a very significant investment for a company of our size", Chief Executive Arthur Sadoun said. "But we're convinced it's the right move ... in a world where data is at the heart of all decisions and the mobile phone has become our main interface."
Epsilon, which brings a data trove on some 160 million individual clients, generated revenue of $1.9 billion last year, almost entirely in the United States.
The $4.4 billion cash price amounts to $3.95 billion excluding tax, or 8.2 times Epsilon's 2018 earnings before interest, tax, depreciation and amortization (EBITDA), Publicis said.
The French company said it would cancel a previously announced share buyback and finance the Epsilon deal with debt, adding that the acquisition would boost earnings and cash flow by at least 10 percent, starting next year.
January-March revenue came in at 2.12 billion euros, Publicis said, releasing quarterly sales ahead of the April 17 scheduled disclosure date. The sales were down 1.6 percent on a like-for-like basis but up 1.7 percent as reported.
The company said the decline in ad spending should ease in the second half, reiterating 2019 guidance including higher sales growth and profitability, and a 5-10 percent increase in recurring earnings per share excluding currency effects.