SYDNEY/PARIS (Reuters) - France’s JCDecaux (JCDX.PA) struck a deal to buy Australian billboard owner APN Outdoor Group (APO.AX) with a sweetened A$1.12 billion ($830 million) offer, part of a rush to consolidate in a tightly controlled sector where revenues are surging.
JCDecaux would become Australia’s biggest outdoor ad firm, expanding its reach in a market where digital ad boards are delivering double-figure sales growth and “Out-of-Home” adverts reach 93 percent of people in the top five cities.
The proposed acquisition would be the famly-controlled French company’s largest since it went public in 2001 and complement its business in Australia, where it often handles ad on bus shelters.
The transaction remains subject to shareholder backing as well as approval from regulatory and competition authorities.
Australia is the world’s seventh-largest advertising market, JCDecaux said. In a flurry of deal-making, APN’s acceptance comes a day after the Australian company lost out to larger rival oOh!media (OML.AX) in a bidding war for bus shelter firm Adshel, a division of No.4 player HT&E (HT1.AX).
The French advertiser will pay A$6.70 a share in cash, a 2.8 percent increase on its initial unsolicited offer that received a lukewarm response from APN and 4.4 percent higher than APN’s closing price of A$6.42.
“We view this deal as positive for the company as JCDecaux tends to get better yields in more consolidated markets and the deal should be largely accretive,” said Liberum analysts, who kept a “buy” rating on JCDecaux shares.
APN shares, lifted to a near two-year high thanks to JCDecaux’s pursuit, rose 0.3 percent on Tuesday in a falling broader market . They remained below the offer price as traders kept a wary eye on the competition regulator and priced in an Australian 30 cents-per-share dividend APN plans to pay before the deal is done.
JCDecaux shares were steady, edging up 0.5 percent to 28.98 euros.
Four companies control nearly all of the $660 million industry in Australia, where strict civic rules capping billboard supply have left companies spending to lift market share.
The market share of the combined entity would be about 35 percent, below the 40 percent regulatory threshold, noted Liberum.
“The JCDecaux scheme is an attractive, all-cash transaction,” APN Chairman Doug Flynn said in statement where he recommended the deal as “compelling” for shareholders.
The French firm had been scouring the globe for possible deals before settling on Australia, with co-chief executive Jean-Charles Decaux in March considering buying rivals in the United States.
JCDecaux generated 23.8 percent of its revenue last year in the Asia-Pacific region and China became its largest market.
APN owns 125 billboard sites across Australia and New Zealand. As eyeballs and advertising dollars ebb from traditional media players such as newspapers and television, Australia’s outdoor market grew by 6 percent in 2017 and revenue is up 10 percent in 2018 so far, according to Morgan Stanley.
“We’re positive on the sector - there’s structural growth and the takeover bid is below the previous peak cycle multiple, so it is a bargain buy in relative terms,” said Mathan Somasundaram, portfolio strategist at stockbroker Blue Ocean Equities.
In its 2017 report, the Outdoor Media Association said Out-of-Home advertising represented 5.9 percent of the total A$14.1 billion advertising spend and reached nine out of ten Austalians in the top five cities daily.
The Australian Competition and Consumer Commission, which last year blocked APN from buying oOh!media on competition grounds, said by email it planned to scrutinize both the takeover by JCDecaux and the Adshel deal.
Reporting by Tom Westbrook in SYDNEY; additional reporting by Rushil Dutta in BENGALURU; Richard Lough in PARIS; Writing by Richard Lough in PARIS; Editing by Muralikumar Anantharaman/Keith Weir