UK brand owners could lose out as ownership of the outdoor advertising industry undergoes another round of consolidation. The world’s largest poster business Clear Channel Outdoor is likely to be put up for sale if private equity companies succeed in buying and breaking up its US parent Clear Channel Communications.
This would provide an opportunity for French poster giant JC Decaux to pounce on its rival and leverage itself from the second largest outdoor company to the world number one.
However, some believe that further consolidation of the UK outdoor market would be detrimental to the interests of advertisers. Brand owners trade body ISBA director of media and advertising Bob Wootton says the market is already concentrated and such an acquisition would raise serious competition issues. “If you restrict a supply in any industry it becomes anti-competitive, which can have harmful consequences,” he says.
If the purchase goes ahead, JCDecaux would have to sell parts of its existing business in the UK to avoid breaking competition rules, but this may not be enough to safeguard it from complaints within the industry.
Wootton says: “Four or five players in the industry is the recipe for an acceptable market share, but any fewer would teeter on the edge of competition concerns. The acquisition would lead to advertisers and agencies raising these issues with the Competition Authority, but this is a longwinded and complicated process involving lawyers and economists. It would best be avoided.” Clear Channel shareholders will vote this month on whether to accept a £19bn takeover bid from Thomas H Lee and Bain Capital Partners. But industry insiders believe the outdoor division of the company, which encompasses 973,000 displays in more than 60 countries and is thought to be worth £1.6bn, will be put up for sale regardless of the result – and that JCDecaux will be the business most likely to benefit from acquiring it.
It would be a great coup for JC Decaux to buy Clear Channel Outdoor, which last week struck a deal with Legal & General to produce a campaign using its Business and Finance pack from its Taxi Media Audience Solutions range (MW last week).
JCDecaux Holding, owned by the Decaux family, owns 70% of the company, which was established by its buccaneering chairman Jean-Claude Decaux in 1964. It operates in 45 countries, earning more than two-thirds of its revenue from outside France.
Although the contractor first entered the UK market in 1992 with a tainted reputation – after being convicted of offering the Mayor of Liege Eduoard Close free trips and media support during his campaign for re-election – JCDecaux was welcomed to the UK poster scene as both financially stable and a product innovator.
Last week it reported a 7.7% rise in revenue to £670m, for the six months ending June 30 2007, following a strong performance in its transport and billboards division globally, with the UK showing the best billboard results overall.
But the French group is still exploring methods of expansion, and co-chief executive Jean-Francois Decaux told investors in March that he would certainly be interested in acquiring Clear Channel. He said: “Only about 7% of our revenue comes from the US. We would like it to be about 35%. That can only be achieved by an acquisition.”
One industry expert acknowledges that Decaux has the resources and the drive to accomplish this goal. He says: “JCDecaux is highly professional and does everything well, but there is not much warmth and it is almost a Moonie-like operation. It will do its homework before it makes any offers and will certainly find a means to smooth its way.”
Outdoor Advertising Association chief executive Alan James says there is no precedent for such an outcome. “No one is sure what would happen in terms of competition laws and this will be a case that tests the waters.”