PUBGY Publicis Groupe SA (QX)

By Nick Kostov and Suzanne Vranica 

PARIS -- Publicis Groupe SA on Thursday tapped Arthur Sadoun, the advertising giant's 45-year-old creative chief, to replace longtime Chief Executive Maurice Levy, part of a succession plan to steady a firm buffeted by massive changes in consumer behavior and technology.

The appointment aims to end years of uncertainty over who will take the reins from the 74-year-old Levy, who built Publicis from a French-focused firm into the world's third-largest ad company by revenue.

Mr. Sadoun, who oversees Saatchi & Saatchi, Leo Burnett and other creative agencies in the Publicis stable, "has a clear vision of the business," said Mr. Levy in an interview.

Filling Mr. Levy's shoes will be tough. Mr. Levy is only the second executive to lead Publicis, which was founded in 1926. He is seen by some in the industry as irreplaceable, much like his rival Martin Sorrell at WPP PLC. Both men are deal-makers who built their companies through massive buying sprees that stretched around the globe and pushed the firms into new sectors such as digital marketing and technology.

Under the succession plan, Mr. Levy is due to become the company's chairman on June 1, leading some ad executives to question whether Mr. Levy will remain the firm's main architect despite the elevation of Mr. Sadoun. "Is it a complete mock up or a real succession?," said one executive.

Mr. Levy said he would "help the transition to make sure I am handing over the relationships, skills and knowledge."

Known as a hard-charging and charismatic executive, Mr. Sadoun has been working to overhaul Publicis's creative agencies, injecting them with more digital firepower. While those changes have ruffled some feathers internally, they have helped the ad giant win some business from companies such as General Motors Co. and Wal-Mart.Stores Inc.

"I'm taking on this new role with confidence, determination and one objective in mind: accelerating our transformation and development," Mr. Sadoun said in a statement.

Steve King, who is in charge of the group's media companies and was in the running to take over from Mr. Levy, will join the Publicis management board.

The company has lost business with fast-moving consumer companies like Procter & Gamble, General Mills and Coca-Cola Co. who switched some of their lucrative media-buying arrangements to competitors.

The change at the helm of Publicis comes at a volatile time in the overall ad business. Big firms have gone on acquisition sprees over the past decade in an attempt to adapt to major shifts in consumer behavior and the rise of digital. An industry that once relied on the wining and dining of clients is being challenged by stock-market like systems that are now used to buy and sell ads.

Mr. Levy has tried to transform Publicis into a more technologically savvy company. He snapped up digital agencies, but those moves have also made Publicis somewhat unwieldy. Under pressure from marketers, ad companies are trying to refocus their activities, forcing disparate units to work more closely together.

In the interview, Mr. Levy acknowledged that efforts to transform the ad giant stalled as he pushed for a merger with Omnicom Group Inc. that was ultimately jettisoned. "Teams were out of focus," he said.

The cozy relationships ad giants have with marketers -- long the bedrock of the business -- have also come under scrutiny as trade groups representing big advertisers have accused ad firms of conducting business in a nontransparent way.

Last year, the Association of National Advertisers said its probe of the ad business found that rebates and other nontransparent practices were "pervasive" in the U.S., which raised alarms about how ad agencies conduct business throughout the industry. Publicis and other ad companies have denied any wrongdoing.

Separately, the U.S. Justice Department subpoenaed many of the large ad companies, including Publicis, last year, as part of an investigation into possible price fixing in video-advertising production

Publicis has a market capitalization of $14.7 billion. Its share price has risen 23.8% in the past 12 months.

Write to Nick Kostov at Nick.Kostov@wsj.com and Suzanne Vranica at suzanne.vranica@wsj.com

(END) Dow Jones Newswires

January 26, 2017 13:58 ET (18:58 GMT)

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