(AP) -- French advertising company Publicis Groupe SA has agreed to buy Microsoft Corp.'s digital advertising firm Razorfish in a move to boost its share of advertising on the Web, according to a joint statement released Sunday.
The deal is valued at $530 million, comprised of cash and 6.5 million Publicis Groupe treasury shares. The two companies also signed a five-year strategic alliance agreement that will allow Publicis to purchase display and search advertising from Seattle-based Microsoft on favorable terms across Microsoft's digital properties in exchange for certain minimum guaranteed purchases.
Under terms of that agreement, Razorfish will continue to be a preferred provider to Microsoft for digital strategy, creative and marketing services and Microsoft has committed to spend a minimum amount for those services each year.
In addition to Microsoft, Razorfish's major clients include Ford Motor Co., Best Buy Co., McDonald's Corp. and Starwood Hotels & Resorts Worldwide Inc.
Razorfish will continue to operate under its brand name and be part of VivaKi, the new Publicis Groupe entity created in June 2008 to reflect independent operations of Digitas, Starcom MediaVest Group, Denuo and ZenithOptimedia. Razorfish's management team, led by Chief Executive Officer Bob Lord, will remain unchanged.
"The acquisition of Razorfish is another step forward in realizing our strategic vision of building a world leader in digital communications, a critically important space for our clients," said Maurice Levy, chairman and chief executive of Publicis Groupe in a statement. "More than anything, this acquisition should demonstrate that Publicis Groupe now presents a wider pool of resources, talent and expertise that will help our clients market their products or services in a way that takes maximum advantage of the new digital world."
Levy added that when the transaction is completed, about 25 percent of the company's annual revenue will come from digital communications, up from around 21 percent currently.
The cash component of the purchase price will be based on the shares' value, calculated by the average closing price of Publicis Groupe stock during the 20-trading-day period ending on the eighth business day prior to the closing date of the transaction. The transaction is expected to close during the fourth quarter of 2009.
Publicis is the world's fourth largest communications company with ad agencies including Leo Burnett,Publicis, Saatchi & Saatchi and media buyers Starcom MediaVest Group and ZenithOptimedia. In digital advertising, it owns Digitas.
Razorfish became part of Microsoft's umbrella as part of the company's $6 billion acquisition of aQuantive Inc. in May 2007.
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