Interpublic to Buy True North for $2 Billion

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 enables New York-based Interpublic to add global agency network FCB Worldwide, one of the world’s oldest advertising concerns, to its two existing global networks, McCann-Erickson WorldGroup and Lowe Group.

Chicago-based True North is the parent of agencies Foote Cone & Belding, known for its “Raid Kills Bugs Dead” campaign for S.C. Johnson and the dancing raisins ads for the California Raisin Advisory Board, and Bozell Group, known for the “milk mustache” ads featuring celebrities for the dairy industry.

There had been widespread speculation that True North would be acquired since it lost its biggest account, DaimlerChrysler, last year.

The merger, which must be approved by True North shareholders and federal regulators, would create a company with offices in more than 130 countries and combined 2000 revenue of $7.2 billion, vaulting it into the top spot over Britain’s WPP Group and Omnicom Group Inc. of New York.

The deal comes at a time when advertisers are looking to cut costs, with a bigger firm better able to offer lower overall prices 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.

Under terms of the deal, Interpublic would exchange 1.14 shares for each outstanding share of True North, which has about 51 million shares outstanding.

At Friday’s closing prices, that made the deal worth about $2.1 billion.

But shares of both companies fell Monday on the New York Stock Exchange, reducing the value to about $2 billion. Interpublic shares fell $1.13 to close at $34.17, and True North fell $1.19 to close at $38.12.