WPP close to sealing $4bn Young & Rubicam merger

WPP, the world's second-largest advertising group, is thought to be close to a $4bn (£2.5bn) deal to acquire the New York firm Young & Rubicam. The move would catapult the British company to the number one spot in the global advertising league, ahead of Omnicom, the US giant.

WPP, the world's second-largest advertising group, is thought to be close to a $4bn (£2.5bn) deal to acquire the New York firm Young & Rubicam. The move would catapult the British company to the number one spot in the global advertising league, ahead of Omnicom, the US giant.

Industry sources said that talks between the companies were "at an advanced stage" and that "most people at Young & Rubicam want the deal to go ahead".

The comments indicate that WPP may have found a solution to the issue of Young & Rubicam's staff severance packages, which had been seen as the major reason for the collapse of earlier negotiations about a link-up, which ended in mid-March.

The severance plan provides top-level executives with so-called "golden parachutes" thought to be worth more than $50m in total, in the event of a takeover of Y&R. However, WPP now believes that the obstacle is not insurmountable and that key personnel could be persuaded to stay on if the deal goes ahead.

Although Tom Bell, Y&R's chief executive, is still said to be opposed to the deal, his influence looks set to diminish once a management voting trust, which he in effect controls, is dissolved next month. It is understood that WPP is not considering the possibility of launching a hostile or tender offer, as has been suggested by some parties.

Analysts say the two agencies would be a perfect fit, with Y&R's direct marketing expertise complementing WPP's market research strengths. The Y&R acquisition would give WPP a third advertising arm alongside its two existing agencies, Ogilvy & Mather and J Walter Thompson. Sir Martin Sorrell, WPP's chief executive, is also said to be keen to take control of Y&R's public relations businesses, Burson Marsteller and Cohn & Wolfe.

There is very little client conflict between the two groups, with the only exceptions including global businesses such as Ford.

Y&R has long been seen as a takeover target, having seen its share price plunge more than 40 per cent since the beginning of the year bringing the group's market value down from almost $5bn to less than $3bn. The company is one of the few remaining independents in an industry which is in the process of widespread consolidation as increasingly global clients want global advertising agencies.