Merger talks between Cheil Worldwide, the advertising unit of Samsung Group, and Publicis Groupe, the French ad giant, seem to have failed to reach a breakthrough, news reports said Thursday. 

Samsung declined to confirm the breakdown. The nation's largest conglomerate has sold off less profitable businesses ahead of its leadership transfer to a new generation.

“It may be too early to say the talks have failed, but they haven’t narrowed differences in deal pricing and other conditions,” said an industry source on condition of anonymity. 


“Publicis is said to be asking for a five-year guarantee for Samsung Electronics orders, but it was a very exceptional request within the industry.”

Cheil, the nation’s No. 1 ad agency, had been widely rumored to be merging with Publicis, one of the top three ad companies globally, within the first half of this year. Samsung Group planned to sell off a controlling 28.28 percent stake that is owned by Samsung C&T, Samsung Electronics and Samsung Card to Publicis.

In a regulatory filing in February, Cheil said it was discussing a partnership with a global company, though it didn’t specify the name of the partner.

For Publicis, it was crucial to expand its presence in Asia, especially the soaring Chinese market, by taking advantage of Cheil’s sales network in the region, while Cheil hoped it could elevate its global brand power by teaming up with the top ad company.

Among other things, the possible tie-up could help them secure more orders from Samsung Electronics, their key clients.

Samsung has increasingly selected an ad agency through public bidding recently rather than depending on its in-house firm. When it comes to its global marketing and ad campaigns, it has preferred to work with global ad agencies.

Samsung spent 2.73 trillion won ($2.29 billion) on advertising globally in the nine months through September 2015. The company didn’t specify the breakdown of ad agencies.

Cheil has also tried to diversify clients by setting up overseas branches in recent years, but their reception has largely remained lukewarm.

“Samsung now sees less benefit from working with Cheil, especially in global markets. Partnering with top ad firms like Publicis would offer more negotiating power in future talks with Samsung,” the source said.

According to news reports, Publicis was also showing reluctance to acquire Samsung’s sports business, including its own baseball and soccer teams, which was recently folded into the ad unit.

Industry watchers say Cheil would continue to seek a global partner even if the talks with Publicis end in failure, but they say it would likely take some time to sign a deal.

By Lee Ji-yoon (jylee@heraldcorp.com)