RealTime IT News

Microsoft Unloads Razorfish Ad Agency to Publicis

Microsoft has agreed to sell the digital advertising agency Razorfish to Publicis Groupe, the French firm that ranks as one of the world's largest ad agency holding companies, for approximately $530 million.

Once the deal is closed, the companies said they plan to enter into what they're calling a strategic alliance agreement that will see Razorfish stay on as Microsoft's (NASDAQ: MSFT) primary digital ad agency, managing campaign strategy and creative.

Additionally, the five-year agreement will enable Publicis and its clients to buy display and search advertising on Microsoft's properties under favorable terms as part of a quid pro quo arrangement where Publicis will commit to minimum aggregate purchase levels.

The new agreement builds on a partnership Microsoft and Publicis struck in June.

Microsoft acquired Razorfish as part of the 2007 purchase of digital ad powerhouse aQuantive, a $6 billion deal that saw the software giant assume the Atlas ad platform and the DrivePM services division. At the time of the aQuantive deal, the ad agency was called Avenue A | Razorfish.

After the sale is completed, Publicis expects the digital sector to account for roughly one quarter of its annual revenue.

"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," Publicis CEO Maurice Levy said in a statement.

Publicis plans to retain the Razorfish brand, and organize the unit under its VivaKi division. The firm created VivaKi in June 2008 to oversee and coordinate the digital ad shops and media buying firms Digitas, Starcom-MediaVest, Denuo and Zenith-Optimedia.

In addition to Microsoft, Razorfish has managed campaigns for major firms such as Best Buy, Ford and McDonald's.

Publicis said it plans to keep Razorfish's management team in tact, with Bob Lord staying on as the unit's chief executive.

The companies expect the transaction to close in the fourth quarter.

The $530 million deal will see Publicis pay Microsoft a combination of cash and 6.5 million Publicis Groupe treasury shares.