Publicis signs Epsilon purchase and further strategical collaboration with Alliance Data

Alliance Data Systems Corporation, a leading global provider of data-driven marketing and loyalty solutions, today announced it has entered into a definitive agreement to sell its Epsilon business to Publicis Groupe. The French multinational will pay a total consideration of $4.4 Bn in cash.

Further, Publicis builds a strategic partnership with Alliance Data remaining business. This acquisition will accelerate the implementation of Publicis’ strategy to become the preferred transformation partner for its clients.

The acquisition of Epsilon is a one-time opportunity to accelerate the implementation of Publicis’ strategy to deliver personalized experience at scale.
With Epsilon at the core, The French ad multinational will become the first player to offer a unique end-to-end services to its clients. It will result in enhanced growth of its existing businesses while opening up new opportunities in an enlarged $1.5 trillon industry.

Headquartered in the USA, Epsilon is a unique technology and platform company focusing on maximizing the value of its clients’ data. In 2018, Epsilon generated $1.9 billion of net revenue, 97% of it in the United States. Epsilon employs approximately 9,000 people, including 3,700 data scientists and 2,000 Bangalore-based technology delivery experts.

Epsilon is a leading provider of multichannel, data-driven technologies and marketing services, also including Conversant, a leader in personalized digital marketing.

The transaction was unanimously approved by Alliance Data’s Board of Directors and is expected to close in early Q3 2019, subject to satisfaction of customary closing conditions and receipt of regulatory approvals.
Net cash proceeds, after tax obligations and fees associated with the transaction, are expected to be $3.5Bn. Alliance Data expects to use the full amount to repurchase shares and pay down corporate debt.

Sadoun, Lévy, Hefferman and Kennedy welcome the move

Arthur Sadoun, Chairman and CEO of Publicis Groupe, explained on this purchase: “Our clients are facing increasing pressure from the rise in consumer expectations, the mainstreaming of direct-to-consumer brands and new data regulations. The only response is to deliver personalized experiences at scale. They have to transform to meet this new market imperative.

“With the acquisition of Epsilon, Publicis Groupe is bringing the necessary technology, expertise and the talent to complement our offer in creativity, media and business transformation, and help our clients leapfrog their competition and grow profitably.

Arthur Sadoun (Chairman & CEO, Publicis Gropup) -left- y Maurice Lévy (Chairman of the Supervisory Board, Publicis). © Publicis Group .

“In 2018 with an unprecedented run of major New Business wins, we demonstrated that we have the right model to be the preferred partner of our clients in their transformation. This acquisition will accelerate its implementation, turbo-charge our game changers and help us grow faster by offering an even more end-to-end solution to our clients.

With this critical move, we are going further, faster and deeper in our own transformation, becoming a leader in this data-led, digital-first world. It’s a one-time opportunity, with very compelling financial terms and delivering double-digit accretion of Headline EPS and Free Cash Flow from Year 1 (2020).
We are thrilled to welcome Epsilon’s remarkable teams and look forward to working together for our clients and growing our relationship with Alliance Data.”

“I’m pleased to say today’s announcement represents a trifecta win for Alliance Data, Epsilon and Publicis Groupe,” said Ed Heffernan, President and CEO of Alliance Data. “The announcement of this transaction represents the culmination of an extensive assessment of strategic options for our Epsilon business. With this transaction, Alliance Data is executing on its previously announced goals of transitioning into a leaner, more focused organization and unlocking additional shareholder value while also finding what we believe to be the right home for Epsilon’s technology, data assets and associates. We believe that Publicis Groupe will be the ideal cultural and strategic fit for Epsilon and its Conversant® business, and will help drive Publicis Groupe’s own transformation in today’s data-driven digital world.

“Furthermore, the unique relationships that have been cultivated between Epsilon and our other Alliance Data businesses will remain intact, and we look forward to working with Publicis Groupe to develop a broader relationship, and promoting mutual and sustainable growth going forward.”

Maurice Lévy, Chairman of the Supervisory Board of Publicis, added: “The Conseil de Surveillance has thoroughly and carefully reviewed this transaction and has approved it unanimously considering that it would be good for all stakeholders.

“For the clients: it will accelerate the transformation of Publicis making it a more relevant and more competitive partner.
For the talents: in a highly competitive environment for talents, Publicis will be in a position to benefit from a remarkable leadership team, 3 700 data scientists and great technology teams and artificia intelligence experts.
For our shareholders: the transaction, which was not planned, has great merits from a financial point of view. The price is fair, the transaction is headline EPS and Free Cash Flow accretive at double digit level, it gives a stronger profile of growth and a new and better balanced mix of product and revenues. Therefore, it will generate value creation that will greatly benefit our shareholders.

“The Conseil de Surveillance has been convinced by the approach of the Directoire and its Chairman and CEO, Arthur Sadoun, on the integration. The plan is reasonable and should lead to a seamless integration with great potential in growth and cost synergies. We are confident that the plan will deliver the expected results on services, growth and synergies.”

Bryan Kennedy, CEO of Epsilon, said:“We are thrilled to join the Publicis Groupe family. During extensive discussions with the Publicis leadership team during the recent review process, we found powerful common ground, including shared values and a strong vision for the future of data-driven, digital-first marketing.”

Seven in 10 largest US companies trust in Epsilon

Epsilon’s success is evidenced by the endorsement of its blue chip clients: Epsilon has gained the trust of at least 7 out of the 10 largest US companies across various sectors including Auto, Retail, Financial Services, CPG and Media.

In addition, its top 50 clients have an average tenure of 14 years and have generated an 8% yearly growth on average over the last two years, demonstrating the significant client benefits delivered by Epsilon.
Epsilon has built its assets in technology, data and platforms at an impressive scale. For example, its loyalty software serves 600 million accounts, it has more than 250 million unique consumers identified in the US, and its proprietary platforms Conversant handle 1 billion updates every 5 minutes allowing to further improve messaging based on consumer insights on a real time basis.

Ed Heffernan (Chairman and CEO of Alliance Data Systems) -right- y Bryan Kennedy (CEO, Epsilon). © Alliance Data Systems.

Epsilon has developed extremely strong artificial intelligence capabilities allowing consumer behavior predictions.
In a world where data privacy is paramount, Epsilon remains at the forefront of consumer privacy, cybersecurity and risk management compliance matters.

A win-win transaction

Epsilon will fuel the entire Publicis organization, complementing its existing Solutions and boosting its Game Changers on the creative, media and digital business transformation fields.

On the creative side, Epsilon assets will bring customer insights to improve ideation and build more relevant campaigns. By powering the Dynamic Creative Engine, Publicis will go one step further to adapt to real time context of customers (who they are, what they do, what theybuy).

On the media side, the connection between Epsilon’s data sets and Publicis Media’s billions of touchpoints will provide superior intelligence to build consumer IDs, segment audiences and maximize media buying ROI by accurately measuring and optimizing campaigns in real time.

On the Digital Business Transformation side, Epsilon will allow Publicis to deliver deep proprietary customer insights to further optimize clients’ business model.

Conversely, Epsilon’s potential will be fully unlocked within Publicis Groupe, thanks to well identified value creation levers. In particular, Epsilon will benefit from Publicis’ client portfolio and global reach to expand further in the U.S. and overseas. Publicis also intends to replicate the success of Epsilon’s unique Auto platform to other verticals (such as Health, Financial Services, Telecommunications, Retail).

Image over the headline.- © Epsilon

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