Ad Venture : Omnicom Group to Buy Los Angeles’ Chiat/Day

Chiat/Day, the influential advertising agency that created the drum-beating Energizer bunny and put Los Angeles on the map in the ad world, on Tuesday marched into the arms of international powerhouse Omnicom Group.

The deal, combining the operations of Venice-based Chiat/Day with Omnicom unit TBWA, brings together two mid-size agencies with similar global ambitions but vastly different styles. New York-based TBWA has a European flair, whereas Chiat/Day is strictly Southern California.

But although Chiat/Day would be surrendering its independence, the agency would still retain its offices here, where it has been the dominant creative force for more than two decades.

“We don’t have the resources in the near future to build an international network,” Jay Chiat, chairman of the agency, said, commenting on the merger. “The way the media world is changing, it is necessary that you be that.”

Terms of the acquisition were not disclosed. People familiar with the deal said Omnicom agreed to pay a combination of cash and stock worth between $50 million and $75 million. Co-founder Chiat owns between 25% and 50% of the agency. The rest is owned by 110 of its 850 employees.

As part of the deal, Chiat would give up the title of chairman and become a consultant to Omnicom, where he would work on interactive projects and meet with clients, among other things. Tuesday, as the deal was announced, he was reviewing unedited footage for a new ad.

Analysts called the acquisition a coup for New York-based Omnicom, a sprawling mega-agency whose units include BBDO and DDB Needham. Chiat/Day, one of the nation’s biggest independent agencies, has long been admired for its creativity. Founded in 1968, when Los Angeles was the Siberia of advertising, Chiat/Day grew as it gained a reputation for inventiveness, drawing talent to Southern California and clients away from Madison Avenue. Over the years, it has created ads for such cutting-edge firms as Nike, Reebok and Apple Computer.

It is credited with setting a new advertising standard with its commercial during the 1984 Super Bowl for the Apple Macintosh computer. In it, a young woman smashed a huge screen broadcasting the image of a Big Brother figure, successfully launching the Macintosh in a way that broke long-established rules: The ad didn’t show the product or list its attributes.

But even by the volatile standards of the advertising business, Chiat/Day has had trouble keeping some of its high-profile clients. For example, it no longer creates advertising for Nike or Apple.

In recent years, the agency has been criticized for losing its edge. In a big blow two years ago, it lost the coveted American Express Green Card account when the out-of-step campaign highlighted extravagance at a time when the nation was mired in recession. The ads featured oversized green cards in odd but luxurious places such as European villages and golf courses.

The anchor of Chiat/Day’s current client roster is the U.S. unit of Nissan Motor Co., which accounts for about three-quarters of the agency’s revenue. Other clients include Coca-Cola’s Fruitopia brand, the Nynex Yellow Pages and Jack in the Box.

On the creative side, TBWA hasn’t been a slouch. It is perhaps best known for its Absolut vodka ads, featuring the shape of the bottle in every thinkable setting, from a swimming pool (“Absolut L.A.”) to a bridge (“Absolut Brooklyn”). TWBA’s other U.S. clients include Wonderbra.

The management lineup at the merged company indicates the deal is a marriage of equals.

William Tragos, chairman and chief executive of TBWA, assumes those positions for the new agency, to be called TBWA Chiat/Day.

Lee Clow, the widely respected creative leader at Chiat/Day, would become creative director of the new agency and remain in Los Angeles. Bob Kuperman would continue to run Chiat/Day’s Los Angeles office.

The only person left off the new executive roster is Bob Wolf, the No. 2 executive at Chiat/Day. He has been given responsibility for developing infomercial projects at the new agency. But people familiar with Chiat/Day said Wolf had been devoting more of his time to special projects and that Kuperman had been running the Chiat/Day headquarters.

Geographically, the two agencies are complementary. TBWA, which was founded in Paris, has a presence in Europe and a client roster that includes Evian water and Nivea skin cream. The two agencies share a client: TBWA represents Nissan in Europe, while Chiat/Day handles Nissan advertising in the United States. Combined billings come to about $2 billion.

Chiat/Day has long struggled to establish a global presence; it lost the Reebok account two years ago in part because it could not handle foreign advertising for the athletic footwear maker.

“Competition is pretty rough in the world of advertising, and the combination of the two agencies makes us stronger,” Tragos said.

The styles of the two agencies, however, could not be more distinct. The atmosphere at TBWA is strictly Continental. Small bottles of Evian are placed at each seat in a tasteful boardroom.

At Chiat/Day, the centerpiece of the boardroom is a table created from a highly polished surfboard. Punching bags with the faces of the agency’s top executives hang in an employee lounge.

The outside of the agency’s Venice headquarters resembles a pair of giant binoculars. Inside, there are no offices, only workrooms. Employees of the “virtual office” use cellular phones and portable PCs and can work anywhere in the building.

Though analysts questioned how well the agencies would blend, executives from TBWA and Chiat/Day downplayed the differences. Tragos said TBWA’s employees would move to Chiat/Day’s office, where, he predicted, they would have no trouble adjusting. He said TBWA’s St. Louis office, in a redesigned warehouse, has already gone virtual.

Chiat said Omnicom CEO Bruce Crawford has expressed interest in expanding the virtual office to the big agency. “There’s a lot of ways that we function that he is interested in seeing whether they make sense,” Chiat said.