US advertising giant Omnicom Group has bought rival media holding company Interpublic Group in a $13.25bn (£10.4m) in a deal that has uprooted the media industry and will make Omnicom the world’s largest advertising agency.

The tie-up between the third and fourth largest media holding giants, both of which employ tens of thousands of staff in the UK, will see London-listed WPP lose its crown as the biggest advertising group in the world.

Under the proposed terms, Interpublic (IPG) shareholders will receive 0.344 Omnicom shares – or $35.6 based on Omnicom’s last close – representing a premium of 21.5 per cent to Interpublic’s close on Friday afternoon.

The deal is widely being interpreted as a strategic response to the significant changes that the advertising and media industry has been subject to since the pandemic. Many of the sector’s biggest players have been slow to adapt to the ascendancy of Big Tech and AI, losing market share to tech giants or because AI advancements have allowed more firms to take an increasing amount of advertising in house.

The new incarnation of Omnicom, which owns the advertising and public relations behemoths BBDO, TBWA and Ketchum, can expect annual revenue of roughly $26bn, based on the firms’ 2023 results.

The deal is expected to come under the microscope of competition watchdogs in the US given the two groups’ size but if passed, will generate “significant free cash flow” in order to funnel more into internal investments and acquisitions.

City AM understands that news of the move has caused disquiet among staff at both IPG and Omnicom, both of which have implemented pay and hiring freezes at various times in the last two years.

It has sparked fears of further job cuts at Omnicom, which has instigated several redundancy rounds at its agencies already in recent years, at it resized staff levels after a pandemic boom led to a hiring spree.

One senior executive at IPG, which owns the likes of McCann and Golin, said that the leadership at their agency had been taken “completely off guard” by the move. And another exec at an Omnicom firm said it was likely to be a blow to morale given their employer’s on and off pay freeze policy over recent years.

John Wren, Omnicom’s chair and chief executive, said: “This strategic acquisition creates significant value for both sets of shareholders by combining world-class, highly complementary data and technology platforms enabling new offerings to better serve our clients and drive growth.”

Wren is expected to retain his role, while IPG’s boss, Philippe Krakowsky, will become the business’s chief operating operator.