SYDNEY • France's JCDecaux struck a deal to buy Australian billboard owner APN Outdoor Group with a sweetened A$1.12 billion (S$1.13 billion) offer, part of a rush to consolidate in a tightly controlled sector where revenues are surging.
JCDecaux would become Australia's biggest outdoor advertising firm, expanding its reach in a market where digital ad boards are delivering double-figure sales growth and "out-of-home" advertisements reach 93 per cent of people in the top five cities.
The proposed acquisition would be the family-controlled French company's largest since it went public in 2001, and complement its business in Australia, where it often handles ads on bus shelters.
The transaction remains subject to shareholder backing as well as approval from the 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 firm lost out to larger rival oOh!media in a bidding war for bus shelter firm Adshel, a division of No. 4 player HT&E.
The French advertiser will pay A$6.70 a share in cash, a 2.8 per cent increase on its initial unsolicited offer that received a lukewarm response from APN, and 4.4 per cent 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.
APN shares, lifted to a near two-year high due to JCDecaux's pursuit, rose 0.3 per cent yesterday in a falling broader market. They remained below the offer price as traders kept a wary eye on the competition regulator and priced in a 30 Australian cents-per-share dividend APN plans to pay before the deal is done.
JCDecaux shares were steady, edging up 0.5 per cent to €28.98.
Four companies control nearly all of the US$660 million (S$898 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 per cent, below the 40 per cent regulatory threshold, noted Liberum.
"The JCDecaux scheme is an attractive, all-cash transaction," APN chairman Doug Flynn said in a 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 per cent 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 per cent last year, and revenue is up 10 per cent so far this year, according to Morgan Stanley.