This is a huge deal, not only in size: $35 billion, but also in its impact on global markets; it topples Sir Martin Sorrell's WPP; and it's bad news for Silicon Valley companies such as Google [$GOOG] and Facebook [$FB]. 

Bloomberg reporters Kristen Schweizer and Marie Mawa: Publicis to Merge With Omnicom to Create Advertising Leader

Publicis Groupe SA (PUB) and Omnicom Group Inc. (OMC) agreed to merge in an all-stock transaction to create the world’s largest advertising company with $23 billion in revenue, toppling market leader WPP Plc. (WPP)

Shareholders of Paris-based Publicis and New York-based Omnicom will each hold about 50 percent of the new entity, Publicis Omnicom Group. Publicis Chief Executive Officer Maurice Levy and John Wren, his counterpart at Omnicom, will be co-CEOs as they unveiled the agreement at a press conference in Paris today. 

The deal is expected to close in the first quarter of 2014. The new company will topple leader WPP, which has a current market valuation of about $23.84 billion.

(Hat tip Don Bulmer.)

Update: Here is a report from Tanzina Veda and Liz Alderman at the New York Times:

The marriage, if it passes muster with antitrust regulators in the United States and Europe, and is given the blessing of the French government, would bring under one roof separate networks of ad agencies — including BBDO, TBWA and DDB under Omnicom, and Leo Burnett and Saatchi & Saatchi under Publicis.

Collectively, the conglomerates represent some of the world’s largest brands, including AT&T, Visa and Pepsi at Omnicom and McDonald’s, Coca-Cola and Walmart at Publicis.

Foremski's Take: Large scale means more control over advertising pricing and media buys. Google is increasingly seen as a media company and therefore as a competitor to WPP, PUB, and OMC. They spend billions of dollars with Google. Smaller agencies have far less leverage and influence.

Google and Facebook, will have to work with a small number of very large agencies who are increasingly united on what works for them. The shift in the scale of the advertising agencies is a huge shift in buying power.

It will spell future problems for $GOOG and $FB. It will be interesting to see if they lobby against the merger's approval. They should do it. I bet WPP won't.

This is a very big story. More analysis coming up…