JCDecaux to buy Australia's APN Group for AUD1.12bn

French outdoor advertising company JCDecaux has agreed to buy Australian billboard group APN Outdoor for AUD1.12bn, or AUD6.70 per share in cash.

The price represents a premium of 18% to the undisturbed closing price of APN on 19 Jun and a 26% premium to the three-month volume weighted average price of AUD5.32.

Co-chief executive officer Jean-François Decaux said: "This acquisition is a significant milestone in JCDecaux’s history in Australia, which is the 7th largest advertising market worldwide, where we have been growing organically since 2000.

"APN Outdoor is very complementary to our existing street furniture assets and through this acquisition, JCDecaux will be attractively positioned to provide a compelling proposition to compete more effectively in the Australian media market where Out of Home accounts for 6% of advertising spend, of which almost 50% is digital. Finally, we are delighted to enter New Zealand, a fast-growing market."

The deal, which is expected to complete by the end of the year, is subject to approval form the Australian Competition and Consumer Commission, the Australian Foreign Investment Review Board and the New Zealand Overseas Investment Office.

Liberum, which rates JCDecaux at ‘buy’, expects the deal to get all the necessary regulatory approvals as the market share of the combined unit will not only be below the 40% threshold but also there will still be two major players in the market.

"We view this deal as positive as JCDecaux tends to get better yields in more consolidated markets and on top of that the deal should be largely accretive," it said.

Berenberg said this is a good deal both strategically and financially.

"We believe that APN fits well with JCDecaux. While JCDecaux is strong in street furniture and has a foothold in transit with the Yarra Trams contract in Melbourne, APN is strong in premium roadside and in transit. Indeed, it used to hold the Yarra Trams contract. We believe that the combined assets ought to offer advertisers a more compelling proposition than the individual businesses. We note also that APN has had a strong focus on digital, with this representing 38% of group revenues in 2017. That fits well with JCDecaux’s focus on offering a premium proposition for advertisers, and its investment in the newly launched programmatic trading platform should improve monetisation of APN’s digital inventory.

"While JCDecaux is paying a premium versus its own valuation, we believe that this should be a good deal for the group given that it will be using debt that comes at a very low margin. Moreover, we believe that there should be both cost and revenue synergies, albeit the company has not quantified the magnitude of such benefits."

At 1355 BST, the shares were up 1% to €29.12.