Merger Leaves O.C. Firm Seeking Agency

The parent of advertising agency Foote, Cone & Belding Thursday agreed to buy rival Bozell, Jacobs, Kenyon & Eckhardt for $440 million in stock.

The deal, reached after a three-year courtship, doubles the size of Foote Cone parent, Chicago-based True North Communications, creating the world’s sixth-largest advertising company.

A casualty of the merger is Foote Cone client Mazda Motor America Inc., based in Irvine. Foote Cone said it would resign the account sometime in the fourth quarter because of conflicts with Bozell client Chrysler Corp.

Foote Cone handled the Mazda account from its Orange County office. Mazda billings were $200 million annually.

Mazda said Foote Cone would continue to work on advertising for its 1998 models, including a redesigned Miata. Mazda said it would begin the search for another agency before the end of 1997.

The merger ends True North’s search for a second global agency to complement Foote Cone, known for its ads for Levi Strauss. The deal gives privately held BJK&E; greater access to capital needed for expansion, while enriching a group of executives who own a significant stake in the company.

“It is in the best interests of both parties,” said James D. Dougherty, advertising industry analyst for Prudential Securities. “If True North wants to consider itself a big-time player, like Interpublic and Omnicom, it had to acquire another agency.”

Interpublic and Omnicom, both based in New York, are two of the top three advertising holding companies. The world’s largest advertising company, in terms of billings, is WPP Group of Britain.

True North shares jumped $1.81 to $24.88 on the New York Stock Exchange.

The merged company, to be based in Chicago, will have combined billings in excess of $11 billion and more than 11,000 employees. Revenue is expected to be $1.2 billion.

True North said that Foote Cone and Bozell Worldwide, a unit of BJK&E;, would operate as separate advertising agencies. Bozell creates ads for Chrysler and Merrill Lynch and developed the milk mustache campaign.

Another casualty of the merger appears to be Mitch Engle, president of True North’s Associated Communications unit, which consists of a hodgepodge of companies involved in advertising, public relations and digital special effects. The unit is being merged into a similar unit at Bozell, and will be headed by Bozell’s current chief executive, Charles D. Peebler Jr.

True North said that Peebler also will become president of True North and a member of its board, along with four other former BJK&E; executives.

Bruce Mason would continue as True North chief executive, but asked outside director Richard Braddock, a former Citicorp president, to be chairman.

True North said that it would take an unspecified restructuring charge when the deal closes, probably in the fourth quarter of 1997.