Ooh Media’s Brendon Cook confident the ACCC will pass Adshel deal
Ooh Media is confident the ACCC will approve the company’s bid for Adshel, but staff should brace for cuts next year, CEO Brendon Cook and CFO Sheila Lines have said.
Speaking this morning, Cook expressed his confidence that the takeover would not fall foul of the competition regulator in the same way the ill-fated merger between Ooh Media and competitor APN Outdoor did last year.
Ooh media CEO Brendon Cook is confident the ACCC will approve the Adshel 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,” Cook said.
“We have had preliminary discussions with the ACCC. However, it’s yet to open its public process which we expect to take two or three months.”
Cook, however, was also confident the APN merger would be approved, saying at the end of 2016 he believed the deal would be approved as the outdoor market makes up just 2.5% of Australian media spend and thus the consolidation would not represent a significant decline in overall market competition.
The ACCC’s Rod Sims subsequently hit out at Cook though, saying he had failed to understand the concerns of Ooh’s customers.
“I seriously think, and I don’t mean to be rude, but I think the CEO of Ooh Media needs to re-engage with his customers” Sims told Mumbrella back in May last year.
“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.”
Should this merger get the ACCC nod, Lines said that headcount reductions would start next year: “We are not targeting any headcount synergies in 2018. We are going to take a considered but disciplined approach to synergy to ensure maximum long-term value for the combined business.
“We expect and are fully confident however that by 2020 we will have fully realised labour synergies of $10 million to $12 million, back office of $3 million and operational synergies of $2 million to $3 million.”
The merged companies’ executive, sales and commercial teams will feel the brunt of the $10 million to $12 million in labour savings with the investor briefing stating: “Strategy, leadership and governance for the merged business will be provided by Ooh and will be managed by a single executive team.
“The Ooh and Adshel sales and commercial teams will be structured to optimise revenues and maintain the excellent advertiser, agency and landlord relationships that both organisations enjoy today.”
Ooh also expects to make around $3 million in back office savings with the combined company’s finance, people and culture and legal functions being fully integrated. A shared services function will be in place by the start of 2020 with the move to a single head office in Sydney being a major saving.
Lines also said she expects the company’s debt ratio to reduce to two times EBITDA (earnings before interest, tax, depreciation and amortisation) once the cost savings are achieved in 2020. The $259.8 million in debt the company is taking on to fund the acquisition – the other $329 million will come from an equity raising – will see Ooh Media’s debt ratio spike at 2.5x.
