JC Decaux to buy APN Outdoor for $1.119 billion

The local out-of-home advertising industry has consolidated even further, with international giant JC Decaux agreeing to buy Australia’s second-biggest player in the space, APN Outdoor for $6.70 per share, which values its equity at $1.119 billion.

JC Decaux had originally bid $1.1 billion for the company last week, but negotiations stalled with APN Outdoor believing the price was too low. JC Decaux also made its offer contingent on APN Outdoor not pursuing its purchase of its main rival in the street furniture business, Adshel, which ultimately sold to Ooh Media for $570 million yesterday.

The concurrent deals, which see Ooh Media and Adshel come together, along with JC Decaux and APN Outdoor consolidating, mean the landscape of Australia’s outdoor industry has significantly changed.

Both deals are subject to approval from the Australian Competition and Consumer Commission, while the JC Decaux and APN Outdoor deal will also need to go through the Foreign Investment Review Board (FIRB) and the New Zealand Overseas Investment Office.

Last year, the competition watchdog scuppered an attempted merger between Ooh Media and APN Outdoor.

Mumbrella understands JC Decaux and APN Outdoor worked frantically over the weekend to secure the deal, after it became clear APN Outdoor would not be successful in its bid for Adshel.

A release on the ASX this morning said the companies have now entered into a Scheme Implementation Deed with JC Decaux, where the international giant will aquire 100% of the issued share capital of APN Outdoor for a cash price of $6.70 per share.

This scheme consideration values APN Outdoor’s equity at approximately $1.119 billion and gives it an enterprise value of $1.217 billion – implying an enterprise value / FY18E multiple of 12.9 times.

The APN Outdoor board is unanimously recommending that its shareholders vote in favour of the deal, noting it offers an attractive valuation and certainty of value.

APN Outdoor chairman Doug Flynn added: “The JC Decaux Scheme is an attractive, all-cash transaction. The APN Outdoor board has unanimously concluded that the Scheme represents a compelling transaction for APN Outdoor shareholders.”

Newly-installed CEO and managing director of APN Outdoor, James Warburton, said the deal was an excellent outcome for shareholders, staff and partners.

“JC Decaux’s proposal is a testament to the position APN Outdoor holds in the Australian and New Zealand media sectors and our recent strong performance, winning and retaining key new contracts,” he said.

“The Scheme is great news for APN Outdoor staff. JC Decaux is a leading global out-of-home company, with more than one million advertising panels in more than 80 countries, more than 1,300 employees and 2017 revenue of €3,493 million.”

The indicative timetable shows the companies plan to provide a draft Scheme booklet to ASIC in August, ahead of the first court hearing in September. A Scheme meeting, as well as the second court hearing will take place in October.

The implementation date is anticipated to be 10 days after the second court hearing.

How did we get here? 

Ooh Media’s successful bid for Adshel and JC Decaux’s deal with APN Outdoor come after a busy 18 months for the out-of-home industry, with proposed mergers flying in every direction.

In late December 2016, APN Outdoor and Ooh Media – Australia’s two largest out-of-home advertising companies – announced their intentions to merge.

At the time, the companies explained the motivation behind the decision was to create a “long-term and diversified asset base across classic, digital and online formats”.

The announcement came six months after Ooh media had bought 85% of youth-orientated publisher Junkee Media for $11.05m.

Despite Ooh Media CEO Brendon Cook’s confidence the merger would be approved – based on the belief that the outdoor market makes up just 2.5% of media spend and thus the consolidation would not represent a significant decline in overall market competition – the merger was ultimately cancelled in May last year after the Australian Competition and Consumer Commission indicated it would intervene on competition grounds.

The boss of the ACCC, Rod Simms, then hit out at Cook, claiming he had failed to understand the concerns of the outdoor company’s clients in light of the merger proposal.

“We had tremendous feedback from his customers and the customers of APN about their concerns about the merger. So it wasn’t just our view there’s not strong substitutability between outdoor media and other media sections, it was also the view of many customers and we could not see evidence that there was strong substitutability between, say, advertising out-of-home and advertising on Facebook.”

Around the same time, APN News & Media – which until now owned outdoor street furniture company Adshel as well as digital publisher Conversant Media and radio company Australian Radio Network (ARN) – decided to clear up market confusion and rebranded to Here There & Everywhere, or HT&E.

APN News & Media once also owned APN Outdoor, but it sold 100% of its shares in 2013. The cross-over in names continued to confuse the market until the rebrand occurred.

With HT&E rebranded, and the Ooh Media and APN Outdoor merger scuppered by the watchdog, new potential partnerships emerged.

In April of this year, HT&E (formerly APN News & Media) revealed it had rejected a bid from Ooh Media to buy Adshel. The proposed bid’s value was not disclosed.

Weeks later, however, Ooh Media upped the bid to nearly half a billion dollars.

HT&E then revealed Ooh Media was not the only bidder at the table for Adshel.

That night, it became clear APN Outdoor was the other bidder, upping Ooh Media’s $470 million offer for Adshel to $500 million, in the first major move from newly-installed CEO James Warbuton.

APN Outdoor then continued to up its offer, bidding $540 million for Adshel late last week, however was ultimately unsuccessful against Ooh Media.

In the wake of the Ooh Media and Adshel deal, it was revealed there would be $18m in cuts as the new business found “cost synergies” from “leveraging combined infrastructure with duplicated resource rationalisation and reducing outsourcing costs”.

In addition, the deal is contingent on Ooh Media ceasing to use the Adshel brand within three months of the acquisition’s completion.

Ooh Media CEO Cook also told investors he is confident the ACCC will pass the deal: “In terms of the ACCC, Ooh does not operate in the out-of-home categories in which Adshel operates, being street furniture and rail, and on that basis we do not expect the issues raised by the ACCC regarding the merger between Ooh and APN Outdoor would be applicable in the combination of Ooh and Adshel.”

In the wake of the deal, HT&E’s chairman Peter Cosgrove stepped down, saying the timing was right to move on from the business as the Adshel sale gives HT&E opportunities to strengthen its remaining assets.

APN Outdoor entered a trading halt yesterday, soon after the Ooh Media and Adshel deal was made official on the ASX, pending a further announcement from the company – which was expected to be its deal with JC Decaux.

JC Decaux had previously told Mumbrella that it wouldn’t pursue any acquisitions until it had re-secured the lucrative City of Sydney contract, which was put up for grabs late last year after two decades with JC Decaux.

Mumbrella understands the outcome of the battle for the City of Sydney contract is not yet known, but many anticipate it will be awarded to either Adshel or JC Decaux.


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