August 2, 2013 2:55 pm

Letter from Lex: a fitting bit of spin

US created advertising colossus, but Asian banks pull out of deal

Big deal. This week was defined by one, as the world’s second and third-largest advertising groups Omnicom and Publicis announced they will combine under a “merger of equals”. This is a fitting bit of spin for a deal between two advertisers. If the combined group can extract the touted $500m in annual synergies, shareholders of both parts will benefit. Then again, advertising is a fast-changing business in which its clients need agents to be nimble. Creating a colossus with $23bn in revenue goes against that.

Meanwhile, Perrigo, a US generic drugmaker, announced an agreed $8.6bn offer for Ireland’s Elan Corp, only this deal was more about taxes than cost savings. The $150m of planned synergies will mostly result through Perrigo’s change of domicile from the US to Ireland.

In Asia, the opposite was happening. Singapore bank DBS walked away from its plan to buy Indonesia’s Bank Danamon for $7bn. The former now hopes to develop its own local business to tap the potential of the Indonesian market.

Elsewhere in banking, Lloyds looks to be out of the doldrums. The UK bank is lending more and doing so more profitably. Although things were not quite as good for Barclays and Deutsche Bank who both need to take big steps to meet new leverage requirements. BNP Paribas has less reason to worry about capital but faces its own problems in terms of slow revenue growth and mounting provisions. At Royal Bank of Scotland, new boss Ross McEwan has a daunting challenge ahead of him as first-half earnings missed expectations.

Results from the carmakers suggest they may be over the worst even if the banks are not. Peugeot and larger rival Volkswagen both posted better than expected first-half results this week. Mazda and Fuji Heavy have also performed well – they are both among the top five gainers in Japan’s Nikkei index this year.

Meanwhile, a classic Russian spat between Vladislav Baumgertner, boss of potash miner Uralkali, and rival Belaruskali, caused the end of one of the world’s major potash marketing cartels.

Email the Lex team in confidence at

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from and redistribute by email or post to the web.