The agency, named 2MV, is 51% owned by Havas' Media Planning Group and 49% owned by WPP's Group M, which houses media agencies MindShare, Mediaedge:cia and Maxus.
It is headed by Yves Del Frate, currently global account director at MPG, who said it will be active in the UK, France, Germany, Italy, and Spain. Mark Mendoza, MPG's UK chief executive, is to double as the UK chief executive of 2MV.
The partnership is significant for the Peugeot Citroen link and for the unlikely association between warring network heads Sir Martin Sorrell and Alain de Pouzilhac.
Peugeot Citroen is currently reviewing its £76m UK media account, which is held by OMD. MPG is the incumbent in France and Spain and in February won the Belgian business from Space and retained the Dutch business.
The alliance between Group M and MPG raises the prospect of an attempt to grab Peugeot Citroen's entire European business.
At the top level, the alliance is surprising in the light of past rivalries. Havas' chief executive Alain de Pouzilhac has lost out twice to WPP chief executive Sir Martin Sorrell in bids to acquire other advertising groups.
De Pouzilhac called Sorrell "a master of manipulation" after WPP beat Havas to acquire Grey Global in September 2004, bringing it another media agency, MediaCom, which remains within Grey. The result was widely seen as consigning Havas to the second tier of global holding groups.
Last year Sir Sorrell, let slip that he had discussed the future of Havas with corporate raider Vincent Bollore, who owns 20% of the French advertising group, nn admission likely to have irritated De Pouzilhac.
WPP had already trumped Havas in 2001 to take control of Tempus, after which it merged its The Media Edge with Tempus's CIA media buying agency to form Mediaedge:cia.
In a 2002 interview, the Frenchman attacked the WPP chief and labeling him arrogant and one of life's "bad guys" after Publicis Groupe lost the fight with WPP for Cordiant Communications.
"There is nothing I hate more deeply than arrogance. Normally, it is the French who are arrogant but I have found one guy who is more arrogant than our entire nation put together," De Pouzilhac said.
In addition, the alliance confuses the picture regarding Havas' search for partner to give MPG better coverage outside Europe, which saw it reportedly talking to Interpublic before Christmas.
MPG was recently hit by the losses by its North America division of the $500m (£265m) Volkswagen and $300m Intel media planning and buying accounts.
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