New York: Omnicom Group Inc. and Publicis Group SA have abandoned their $35 billion plan to merge, citing challenges that couldn’t be overcome and the uncertainty that resulted from a slow pace of progress in completing the deal.

The companies said on Friday in a statement the decision to call off the deal, which would have created the world’s biggest advertising agency, was unanimously approved by both companies’ boards, and there will be no termination fees.

“The decision to discontinue the process was neither pleasant nor an easy one to make, but it was a necessary one," Publicis chairman and chief executive officer Maurice Levy said in a statement. “Prolonging the situation could have led to the diversion of the group’s management from its principal function: to best serve our clients."

The two companies agreed in July to a stock swap to form an advertising giant with $23 billion in annual revenue, overtaking London-based WPP Plc. Ownership would have been split down the middle for the two sets of shareholderes and the chief executive officers would have jointly run the combined entity.

The boards couldn’t agree on key management roles as well as integration from top to bottom, according to a person with knowledge of the matter who asked not to be identified discussing private deliberations.

Biggest agency

Paris-based Publicis, the third-largest firm, owns Saatchi and Saatchi North America Inc. and Leo Burnett Company Inc., and offered digital assets including Digitas Inc., LBi International NV and Razorfish LLC, as well as strength in emerging markets.

Omnicom, based in New York, ranked second and is strongest in the US, with agencies including BBDO and TBWA.

Omnicom fell 2.7% to $64.40 in extended trading in the US. The shares advanced 0.6% earlier in New York to $66.20, before the announcement. Publicis added 0.6% to €60.69 in Paris.

In an 16 April interview with EuroBusiness Media, Levy said he was confident the merger would close.

“Should the deal fall apart, we are serene and we have a very solid balance sheet, robust," Levy said. “If we need to make some financial movement, share buybacks or whatever, we have the capabilities."

The executives adopted a more negative tone on the prospects of closing the merger as a result of difficulties getting tax approvals from European governments. There also were reports that the companies were at odds over which one is the legal acquirer and who would fill certain senior positions.

On an 22 April conference call, Omnicom CEO John Wren said the transaction was moving slower than we originally anticipated, due to its complexities.

In an interview with CNBC, WPP’s Sorrell said his firm had begun to pick up clients from its two rivals. He called the deal a sorry saga driven by egos, and said the failed merger was a case of eyes bigger than tummy. Bloomberg