There have been more than 20 ownership deals within the outdoor media sector in the past three years. Most of these have involved the acquisition of small regional companies by larger nationals.
Three quarters of the outdoor sector is now owned or controlled by five major players – Clear Channel (which owns the More Group), Westinghouse (TDI), Havas Outdoor Advertising (Mills & Allen), JC Decaux, and Maiden. Of these, only Maiden has interests confined to the UK. Havas has now been put up for sale by its parent Vivendi, which has sparked a lot of interest from a range of players, including Carlton.
There is now firm interest in outdoor from TV and radio owners. Cross-media ownership is already widespread in Scotland. Scottish Media Group has bought poster company Primesight for 35m. Scottish Radio Holdings (SRH) acquired another poster specialist, Trainer, for 27.5m. Clear Channel bought Jazz FM, and is part of a consortium that will bid for digital radio franchises. It is likely that this part of the media will be controlled, not by outdoor companies, but by radio and TV companies which also own outdoor. There are three good reasons for this.
Firstly, outdoor has a continually growing audience, and is therefore becoming increasingly valuable. Cross-media ownership is also beneficial for media owners which want to advertise their products for free. This alone, amounts to savings of millions of pounds. Thirdly, TV and radio companies are sitting high on share price and price earnings ratios. Outdoor, which is also a broadcast medium, looks cheap.
This third point is born out by the recent deals made in outdoor. Last year, More Group bought Town & City, a northern poster contractor, for 7.5m. It was felt at the time that More paid over the odds for the company. More bought it on a “price per panel” basis, a traditional method of evaluating a poster contractor’s inventory. In this case the 7.5m equated to 3,500 per 48-sheet site. However, the latest deal – SRH’s acquisition of Trainer – equated to six times this amount per 48-sheet site. Postermobile, and Atlantic in London have since been acquired by Clear Channel for 20m and 2m respectively. These deals equate to a price per panel of 16,000.
This quantum leap is the result of evaluating worth, not on the number of panels the company owns, but on a price earnings ratio based on profit. A price earnings ratio of 23 times its share price in Trainer’s case. That’s a lot, and the news took the outdoor industry by surprise. But it shouldn’t have, given that Maiden and Primesight are currently on ratios of 23 and 31 respectively.
Outdoor is a valuable commodity. With hindsight, some are now saying Town & City sold out cheaply. These were the same people who were slapping the back of the managing director Johnny Patof a year ago, saying what a good deal he had struck. A year from now they could well be saying Trainer was a snip.