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The world’s biggest advertising agency, Dentsu of Japan, is in

talks with Leo Burnett about acquiring a sizeable minority stake in the

privately owned advertising network.

The move, which is likely to deliver around 20 per cent of Burnett to

Dentsu, will give Burnett substantial cash to fund its global expansion

plans. At the same time, it will plug the Japanese market leader into a

network that is strong in geographical areas where Dentsu is weak,

notably the US, Latin America and parts of Europe.

Both sides confirmed there would be no merger between the companies.

Dentsu said in a statement: ’Leo Burnett and Dentsu hope to build a

structured but flexible relationship while maintaining the independence

of each agency.’ It added that its joint venture with Young & Rubicam,

Dentsu Y&R, would be unaffected.

Dentsu’s president, Yutaka Narita, has held top-secret discussions with

Burnett’s chairman, Rick Fizdale, for about a year but inside sources

said these have been ’particularly intense’ during the past six

months.

’It gives us the potential to have a significant capital injection to

fund our acquisition and diversification drive,’ Jeff Fergus, Burnett’s

group president for Europe, Middle East, Africa and Asia-Pacific,

explained.

He said this would principally be in media and non-mainstream

advertising areas, such as below-the-line.

These talks were given new impetus last month when a planned merger of

media interests between Burnett and MacManus fell through after months

of negotiations (±±¾©Èü³µpk10, 20 November).

Burnett is one of America’s top three agency networks, and the last one

of any size to retain a media function. Conscious that it has to expand

to maintain competitiveness, Burnett spun off its media service as

Starcom earlier this year, and has been seeking alliances with other

operations ever since.

Dentsu is by far the largest agency in Japan, with around 40 per cent of

the market. However, its expansion abroad has met with only patchy

success. Although its Asian joint venture with Y&R has been successful,

its US operations have been disappointing, while a joint venture with

Eurocom in the early 90s fell through after three years.

In Europe, Dentsu has been adding bulk through acquisition, particularly

through the UK’s CDP and Travis Sennett Sully Ross, which recently

acquired another London agency, Harari Page.