(Updates CBS Outdoor shares, adds CBS Corp shares, background)
By Jennifer Saba and Tanya Agrawal
March 28 Shares of CBS Outdoor Americas Inc
rose as much as 9 percent in their trading debut,
valuing the outdoor advertising company at about $3.7 billion as
it pushes for a bigger slice of the ad market and its parent CBS
Corp focuses more on content.
CBS Outdoor's solid debut on Friday contrasted with that of
"Candy Crush Saga" game maker King Digital Entertainment Plc
earlier this week, suggesting that demand remains
strong for shares in stable companies with strong cash flow.
"What the King IPO did is bring back some sanity in how
offerings are priced," said Francis Gaskins, research director
at Equities.com. "What investors like are big established
companies with high barriers to entry."
CBS Outdoor's shares touched a high of $30.46 in morning
trading on the New York Stock Exchange after its initial public
offering was priced at $28 per share, the top end of the
expected price range.
King's shares fell as much as 16 percent on Wednesday after
one of the most hyped initial public offerings the year.
CBS Outdoor has long been seen as an awkward fit for a CBS
Corp, owner of the most-watched TV network in the United States.
"This seemed like a very good financial idea to do a
transaction that would unlock the value in CBS Outdoor," CBS
Chief Executive Les Moonves told Reuters ahead of the IPO.
"It enables us to get quite a bit of capital to go forward
with our desire to increase our profile in the content
business," he said. The IPO raised about $560 million.
CBS Outdoor's shares were up 6.25 percent at $29.75 in early
afternoon trading, while those of CBS Corp, which has a market
value of about $36.5 billion, were up 1.6 percent at $62.46.
CBS Outdoors Chief Executive Jeremy Male said he aimed to
convince big advertisers to move more of their spending to his
company's billboards and other displays.
U.S. outdoor media represents less than 5 percent of
advertising spending, compared with 8 percent in the rest of the
world, Male said in an interview.
"The top 50 advertisers only spend 2 percent of revenue on
outdoor," said Male, who joined the company in September after
serving as a top executive at JCDecaux SA, the world's
largest outdoor company.
"We see a great opportunity to work hard and develop that
advertiser base," he said.
CBS Outdoor counts Apple Inc, McDonald's Corp
and Sony Corp among its clients.
CBS Outdoor's offering reduced CBS Corp's stake in CBS
Outdoor to 83 percent. Its holding will drop to about 81 percent
if underwriters fully exercise options to buy additional shares.
Goldman Sachs, BofA Merrill Lynch, J.P. Morgan and Morgan
Stanley are lead underwriters of the offering.
CBS Corp plans to divest the rest of shares through a
tax-free splitoff later this year, after which CBS Outdoor will
trade as a tax-efficient real estate investment trust (REIT).
CBS Outdoor has about 329,100 displays in the United States
- many in desirable locations such as the Bay Bridge in San
Francisco and Grand Central Station in New York - and about
26,100 displays across Canada and Latin America.
Male said CBS Outdoor would invest to make more of its
displays digital. About 1.5 percent are in digital format now.
Outdoor advertising companies have been converting their
traditional billboards to digital billboards as this allows them
to run multiple ads on each display.
"If you are looking for cover and frequency on a particular
demographic, people's travel patterns are repetitive," Male
said. "It's a great argument for greater efficiency for
CBS Outdoor's competitors include Clear Channel Outdoor
Holdings Inc and Lamar Advertising Co.
CBS Outdoor reported revenue of $1.3 billion and net income
of $143.5 million for 2013. The company had about 19,700 clients
in the United States at the end of the year.
(Editing by Bernard Orr, Savio D'Souza and Ted Kerr)