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APN Outdoor Group and Ooh Media to merge

APN Outdoor and Ooh Media are set to merge to create a “leading, diversified out-of-home and online media group in Australia and New Zealand”.

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The merger has been announced to the ASX this morning, with the companies explaining the rationale behind the decision is to create a “long-term and diversified asset base across classic, digital and online formats”.

The merged group for FY16 would have a profit of $171m with the merger forecast to achieve cost synergies of at least $20m per annum “to be realised on a run-rate basis within two years following implementation of the merger”.

According to the ASX announcement the merger would have “significant value accretion to be shared by both shareholder groups”.

Subject to Ooh Media shareholder approval, and the other conditions of the deal being satisfied, the merger is expected to be implemented in April 2017.

According to today’s announcement, competition watchdog the ACCC will also be notified of the deal. Given the dominant position in the outdoor market of the new company, there would be no certainty of a green light.

Ownership of the merged group will be split between APN Outdoor and Ooh Media shareholders 55% and 45% respectively.

Ooh Media shareholders to receive 0.83 APN Outdoor shares for each Ooh Media share held.

The merged group’s board will be comprised of eight director – four each from APN Outdoor’s and Ooh Media’s respective boards with APN Outdoor chairman Doug Flynn chair the merged group’s board.

Doug Flynn

Doug Flynn to chair the merged group

Flynn said: “The merger of APN Outdoor and Ooh Media is a compelling opportunity for all shareholders. The businesses bring together complementary asset portfolios across key formats in metropolitan and regional markets to create a leading and diversified out-of-home and digital online media group in Australia and New Zealand. We are excited by the growth prospects presented by this merger.”

Cook: Will lead the new company

Cook: Will lead the new company

Brendon Cook will be CEO and managing director of the merged group, while Wayne Castle, CFO at APN Outdoor, will be CFO of the new group.

The announcement also signalled that there could be job losses as a result of the merger, signalling “cost synergies”.

Michael Anderson, chairman of Ooh Media, said in the announcement: “The combination of these businesses will create an attractive media offering, supported by a passionate and experienced team. We believe the amount of cost synergies expected to be generated, and the resulting EPS accretion will create substantial value for both shareholder groups. We are pleased that the enhanced balance sheet strength and financial scale, together with increased funding opportunities, will support the merged group’s ability to pursue future growth and digitisation opportunities.”

Herring: Leaving

Herring: Will leave the company

Richard Herring, CEO of APN Outdoor and the current chairman of the Outdoor Media Association, will leave the company, but continue to be available for 12 months from the implementation of the merger as a consultant to assist as required in the integration of the two businesses.

Flynn said: “Due to the compelling nature of the transaction for shareholders, Richard has agreed to stand aside to facilitate this attractive merger. After 16 years as a chief executive and 22 years in the out-of-home industry, Richard is keen to explore other opportunities in the business world. On behalf of the APN Outdoor Board I would like to thank Richard for the terrific job he has done in growing the business and wish him all the best for his future endeavours.”

The directors of APN Outdoor and Ooh Media unanimously agree that the transaction is in the best interests of their respective shareholder groups, the announcement said.

Ooh Media has been active in its deal making throughout 2016, including buying Junkee Media in June and acquiring Executive Channel network in October.

APN Outdoor, which has its roots in APN News & Media, was sold off to private equity before floating on the ASX two years ago. Ooh Media also launched on the ASX two years ago.

At the time of posting, APN Outdoor has a market capitalisation of $900m while Ooh Media is valued at $714m on the ASX. Together, the new company would have a market capitalisation of $1.6bn, making it one of Australia’s largest media companies.

By comparison, Nine Entertainment Co is valued at about $900m, Seven West Media is worth $1.14bn and Fairfax Media just under $2bn. APN News & Media – which is no longer connected to APN Outdoor – is valued at $827m.

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