CALIFORNIA : ADVERTISING & MARKETING : True North Reorganization Combines FCB, Bozell Offices

Advertising agency True North Communications Inc. said Thursday that it has combined its FCB Worldwide unit with two U.S. offices and all international offices of its Bozell Worldwide division to create the fifth-largest global ad agency, with annual billings estimated at $8.2 billion.

The move is expected to lead to further consolidation of True North’s operations in Southern California, where about 200 people are employed in four offices in Los Angeles and Orange counties.

True North said administrative and operating efficiencies resulting from the merger will result in annualized savings of nearly $25 million. But the Chicago-based company said it will take $65 million to $75 million pretax in restructuring and other charges in its third quarter to cover costs of the merger.

The new FCB Worldwide, which combines Bozell offices in Detroit and Costa Mesa with its international offices and FCB Worldwide, creates the largest U.S. agency in terms of billings, estimated at $4.9 billion, True North said.

The reorganization moves DaimlerChrysler, a longtime Bozell client in Detroit and that agency’s crown jewel, to FCB. And the transfer of Bozell’s Costa Mesa office gives FCB Hilton Hotels, Taylor Made golf equipment and Western Digital, among others.

A True North spokeswoman said no changes are expected in Detroit. But in a statement, Chairman and CEO David Bell left the door open to change in Southern California, saying the company will “study its options in a thoughtful and deliberate manner.”

The former Bozell office in Costa Mesa employs about 120 people. Observers said True North is likely to consolidate operations to save real estate and back-office expenses. Such a move wouldn’t be expected to result in a large number of layoffs.

But it could make FCB more competitive, since a larger office would have the resources to compete for bigger accounts.

The overall changes give FCB a more balanced mix of domestic and international clients while avoiding client conflicts that would result if FCB fully absorbed Bozell. Bozell, for example, handles Bank of America and Bell Atlantic, while FCB creates ads for Chase Manhattan and AT&T.;

True North said it named Brendan Ryan, formerly chairman and chief executive of FCB Worldwide, chief executive of the expanded FCB. Leo-Arthur Kelmenson, formerly chairman and chief executive of Bozell Worldwide, was named chairman of the new company.

“Moving forward, we believe this is the right structure for achieving our top priorities of stronger organic growth and operating margin,” Bell said.

In 1998, True North ranked seventh among global holding companies, with annual revenue topping $1.2 billion and annual billings of more than $12 billion.