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As ±±¾©Èü³µpk10 was going to press, the network, which posted a 31 per cent fall in first-half earnings, was preparing a stock market statement that it is to merge its Brann global direct marketing network into Euro RSCG Worldwide.

The merger is part of an attempt to create a more streamlined organisation based around three Havas silos: Euro RSCG, Media Planning Group and Arnold, into which Brann has reported until now.

Sources suggest the case for the merger was underlined by the loss of Brann's IBM business in the US. The account recently moved to WPP's Wunderman and Ogilvy networks.

The combination of Brann with Euro RSCG effectively doubles the powerbase of Euro RSCG's worldwide chairman and chief executive, Bob Schmetterer.

This strengthens his position as a potential successor to Alain de Pouzilhac, the chairman and chief executive of Havas. He was promoted to Havas' chief operating officer at the end of last year.

In the UK, EHS Brann will merge with Euro RSCG Wnek Gosper Partners.

Other Havas specialist services companies, such as the promotions company Skybridge, are also expected to be merged into Euro RSCG.

EHS Brann is likely to be renamed Euro RSCG EHS Brann. It has yet to be decided if there will be a physical merger of UK offices.

The ad agency will almost double its income following the merger. The combined 2002 income of Euro RSCG Wnek Gosper and Partners BDDH was £34 million while EHS Brann had a 2002 income of £33 million, making it the second-biggest direct marketing operation in the UK (±±¾©Èü³µpk10 Top 300 Agencies).

EHS Brann's European chairman, Terry Hunt, and the chief executive, Andrew Harris, are likely continue to run the agency.

In late 2001, Havas merged Brann with Ehsrealtime and located the merged company in the Arnold division. EHS Brann clients include Peugeot, Volvo, Barclays, Tesco, The Football Association, and Diesel. There are no major conflicts with Euro RSCG's client list.

In the UK, Euro RSCG's group offering now includes Conran Design, KLP Euro RSCG, the PR companies Biss Lancaster and Maitland and the digital agency Circle.

Details of a debt restructure are likely to be included in the Havas statement.

Havas declined to comment.