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- WPP Group and Young & Rubicam announced this morning that they have signed a definitive merger agreement after months of on off talks.

Under the terms of the deal, Y&R will join the WPP group of companies in a $4.7 billion transaction, creating the world's largest communications services group.

With Y&R, the WPP group will become the world's number one, offering its expanded client base, which includes the majority of the Fortune Global 500 and the Nasdaq 100, a comprehensive array of resources in all service categories.

On a pro-forma basis for the year ended 31 December 1999, the combined group had revenues of $5.2 billion (£3.2 billion) with a combined market capitalisation of $14.5 billion (£9.6 billion). This ranks the group 34th in the UK FTSE-100 and 109th in the FTSE Eurotop 300.

Under the terms of the definitive agreement, which has been unanimously approved by both companies' Boards of Directors, each outstanding share of common stock of Y&R will be converted into 0.835 of a new American Depositary Receipt of WPP or, at the election of the shareholder, 4.175 new WPP ordinary shares, for each Y&R common share held at closing. WPP will then be owned approximately two thirds by current WPP shareholders and one third by Y&R shareholders.

All Y&R operating companies will continue to operate from their current headquarters in the US. Y&R brings a third major advertising agency network to WPP, to standalone side J. Walter Thompson Company and Ogilvy & Mather Worldwide.

After the close of the transaction, Tom Bell will be chairman of Young & Rubicam and Michael Dolan will be chief executive officer.

Five Young & Rubicam directors will join the WPP Group board and senior Y&R executives have signed employment agreements.

Sir Martin Sorrell, chief executive of WPP, said, "This transaction creates a worldwide leader. The two organizations are highly compatible. We share a common philosophy and culture of providing clients with integrated solutions to their marketing needs, and seek to add value to our clients and our people. At the same time, the two complement one another from a client, functional and geographic point of view."

He added: "As a part of our focused strategy to provide clients with a full spectrum of services to meet every communications need, we look forward to developing the strengths of the services provided, and the geographic reach that Y&R will bring to WPP. Together, we have the people and assets to create significant growth and value for our clients, our people and our shareowners."

Bell commented: "Young & Rubicam's success over the past few years is a reflection of the differentiating power of our integrated communications model. Going forward, we want to take this competitive advantage to the next level. To build the first web-based marketing communications company that can create, assess and refine marketing programs in real-time with the speed required of our clients by our new economy."

He continued: "By joining forces with WPP Group, we can accelerate that vision. The fit between our companies is terrific, with leading brands in every marketing discipline. Y&R clients will benefit from access to new capabilities, as well as the additional reach and clout that we'll enjoy in the marketplace. What is more, Y&R will be well-positioned to participate in and shape the future of commercial communications, particularly in the area of interactive marketing and e-commerce."