Microsoft is to sell the digital marketing agency RazorFish as part of its ongoing effort to take on Google in the search-advertising space. Microsoft will sell the agency to French media and advertising company Publicis Groupe in a deal valued at about $530 million, the companies announced yesterday.
The companies also said they have signed a five-year strategic alliance agreement that will become effective at the closing of the deal, expected in the fourth quarter and subject to regulatory approval. The acquisition is expected to be paid for with a combination of cash and Publicis treasury shares.
The strategic agreement expands a broad cooperation pact that the two companies announced in June. The agreement allows Publicis client agencies to buy display and search advertising from Microsoft on favourable terms, in exchange for guaranteed aggregate purchase levels.
The pact also calls for Razorfish to be a preferred provider to Microsoft for digital strategy and marketing services, and contains provisions for Microsoft to spend a minimum amount for those services, the companies said in a statement.
"We look forward to continuing to work with Razorfish as one of our agencies, and we're confident that as a part of Publicis Groupe, Razorfish will build on its success to date in the digital advertising industry," said Microsoft CEO Steve Ballmer, in a joint statement from the two companies.
Microsoft acquired Razorfish in 2007 when it bought aQuantive, a digital marketing services company, for about $6 billion in order to compete better with Google. Microsoft's battle against Google has taken many twists and turns, and hit a major milestone on July 29, when after a year and a half of negotiations it struck a deal with Yahoo under which Microsoft's Bing search engine will power Yahoo's search site, and Yahoo will sell premium search advertising services for both companies.
See also: Microsoft, Yahoo ink Bing deal
Meanwhile, the sale of Razorfish has been rumored ever since Microsoft and Publicis announced their alliance in June.
"The acquisition of Razorfish is another step forward in realising our strategic vision of building a world leader in digital communications, a critically important space for our clients," said Publicis CEO Maurice Levy, in the joint company statement.
Razorfish will continue to operate under its brand name and will function as part of VivaKi, the unit created in June to seek synergies among various Publicis units including Digitas, Starcom MediaVest Group, Denuo, and ZenithOptimedia.
Razorfish's management team will stay in place, Publicis said.