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Ooh Media APN merger may face ACCC hurdle, taking more than 50% of out-of-home market

The merger of Ooh Media and APN Outdoor will see the combined entities control more than 50% of the out-of-home market, but CEO of the new entity, Brendon Cook, remains confident the deal will receive the approval of the competition watchdog.

Cook: Will lead the new company

Cook: ACCC approval not a concern

Ooh and APN announced the merger, creating a company worth $1.6b yesterday, with shares in both companies rising almost 10% on the back of the announcement.

Speaking with Mumbrella, Cook said Ooh / APN would account for only 2.5% of the media market spend.

He admitted that the company now controlled the majority of the out-of-home market, saying its share would be “less than 55%” but he did not see approval by the Australian Competition and Consumer Commission as an issue.

ooh_apn_427x255“Our view is we will leave the ACCC to comment on their position, but we have done the work, we have employed the right legal counsel who has given us confidence that the process should be allowed,” Cook said.

“The reality is, the combined group, we are only 2.5% of the total media pie, and much as I’d like that to be different the reality is that we compete against everybody in the media pie.”

Cook said that with a share of out-of-home of “less than 55%”, he did not believe the company would be able to exert undue market power and compared it to the share of companies such as Google and Facebook in the digital space.

“How much does Google and Facebook represent of the social media and other markets?” he said.

“The reality is we are still a very competitive industry, we are an industry that does have the ability for people to enter the market. We have seen that in the last few years with the market.”

He said Ooh / APN’s position and pricing would still be governed by the need to be competitive in a broader market.

“We have to be able to be competitive, we have to be able to work for clients, we have to be able to deliver the right levels of performance for our medium,” he said.

“Those things are real and the consequence of them being real is that we do compete in the broader media market. We do compete against big, multinational people who are investing heavily in tech and data, and we really are a technology and new media company.

“We believe that for those reasons the transaction should be allowed, but that is a now up to the ACCC to do their market review and decide that.”

The ACCC is awaiting further information from Ooh and APN before embarking on the review and is likely to look at whether competition will be reduced in specific geographic locations.

The competition watchdog could take a similar view to the merger as it did with its ruling to allow the acquisition by News Corp of Australian Regional Media from APN News & Media, where it said consumers still had a large choice of media online.

Cook said the path to the merger had been a long one. “The reality was that both companies have obviously throught it was a great idea at some point,” he said.

“It probably needed a whole series of things to come together – not the least being relative valuations and, I suppose, circumstances presented themselves. In keeping open lines of communication, things developed and we ended up with today.”

Junkee MediaCook said the hoped the merger, coupled with recent investments in companies such Junkee Media, which offer the business a content option, would see the company regarded as a true media company rather than an outdoor media business.

The merged business has a larger market capitalisation than Nine Entertainment Co., which is valued at about $900m and Seven West Media which is worth $1.14bn.

“We internally in the business have always said we are a location-based media company and we feel that that is more reflective of where we are going and where we can lead out-of-home.

“We have moved into content and other technology plays and will continue to do that where it delivers support to our location strategies.”

One challenge that remains is the naming of the new entity, which Cook says will wait until after the ACCC determination as to how it might market itself, going forward, and would work with an independent brand company.

He said the track record of out-of-home in recent years, posting a consistent growth curve, would continue.

“We can still drive a lot more growth and I firmly believe that the out-of-home industry should be at least at 8% (share) and growing from there, so we have got a lot of work to do to showcase.

“There is still a lot of work to do around the platform that the industry has built from both classic and digital today and it’s not really being used to the efficiency and effectiveness.”

The merged company would realise savings of $20m per year for the first two years through the reduction in duplicated operations.

“The medium has a lot of growth left in the way it needs to get its own house in order but, conversely, we also need a lot of work on the creative community and the clients to make sure they are using it the right way to take full advantage of the platform we now have.”

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