NEW YORK—Publicis and Omnicom have abandoned their proposed merger, with management tensions and regulatory issues conspiring to scupper the $35bn deal.

The deal, which would have created the largest holding of PR agencies, ahead of rival WPP, is to be terminated nine months after it was announced to much fanfare.

In a joint statement, Publicis Groupe chairman and CEO Maurice Lévy, and Omnicom president and CEO John Wren said: “The challenges that still remained to be overcome, in addition to the slow pace of progress, created a level of uncertainty detrimental to the interests of both groups and their employees, clients and shareholders. We have thus jointly decided to proceed along our independent paths. We, of course, remain competitors, but maintain a great respect for one another.”

Speculation had mounted in recent weeks that the deal had become increasingly problematic, thanks partly to the cultural clash between France's Publicis and US company Omnicom. Last month, Wren also said that tax issues were threatening the merger.

The failure of the merger will vindicate the views of WPP CEO Sir Martin Sorrell, who had repeatedly questioned the rationale behind the deal. Speaking at the Holmes Report's Global PR Summit last year, Sorrell said “there are regulatory issues…and no benefits articulated for clients or the people within the organization.”

In several interviews today, including one with the FT, Sorrell noted that “in the end it was a case of eyes bigger than tummy”.

Omnicom PR agencies include FleishmanHillard, Ketchum and Porter Novelli, while Publicis' PR assets are largely grouped under the MSLGroup brand.