SYDNEY (Reuters) - French outdoor advertising company JCDecaux (JCDX.PA) made a conditional $803 million takeover offer for Australian billboard firm APN Outdoor Group APO.AX to protect its market share, drawing a frosty response from APN.
JCDecaux, which sells ads in bus-stops and billboards, offered A$6.52 per APN share, an 11.5 percent premium to APN’s closing price on Wednesday, valuing it at A$1.09 billion ($802.46 million).
The offer, which is indicative and non-binding, is also conditional upon the scrapping of APN’s A$470 million bid for HT&E’s (HT1.AX) outdoor advertising division Adshel, a direct competitor of JCDecaux.
In a statement on Thursday, APN called the premium “modest” and said it would not back down on its proposal to acquire Adshel. It will continue doing due diligence on the company, it added.
“APO believes that the Adshel proposal is an attractive opportunity for the company and its shareholders,” APN said, although it cautioned there was no certainty a deal would proceed.
The offer is subject to a significant number of pre-conditions, including the approval of the Australian Competition and Consumer Commission (ACCC), APN said, adding that it was evaluating the JCDecaux offer.
APN shares hit two-year high levels on Thursday, surging as much as 14.5 percent to A$6.70 before erasing some of the gains to trade at A$6.59.
The French company’s local unit is under threat from APN’s intentions to expand in the bus-advertising market, analysts said.
“This is brought on by the timing of APN bidding for Adshel,” said Ivor Ries, senior analyst at Morgans.
“JCDecaux are making a bid to try to prevent that from happening,” he added.
APN, Ooh!Media (OML.AX) and JCDecaux rank first, second and third in the A$900 million billboards and outdoor advertising market in Australia, according to research firm IBISWorld. HT&E ranks fourth.
The ACCC last year blocked a planned merger between APN and Ooh!Media because that tie-up would have harmed competition.
Ooh!Media shares rose 4.2 percent on Thursday morning.
“This bid has alerted the market to the fact that Australian outdoor media companies are trading well below international comparables,” said Morgans analyst Ries.
He estimates JCDecaux’s offer prices APN at about 16 times forecast 2019 earnings.
“Given that overseas outdoor companies are trading in the high twenties PE ratios, this might alert other players to the value gap,” Ries said.
(This version of the story has been refiled to fix the spelling of ads in the second paragraph.)
Reporting by Paulina Duran in SYDNEY and Rushil Dutta in BENGALURU; Editing by Richard Pullin and Muralikumar Anantharaman