A surprise and highly condition $1.1 billion takeover offer for from French group, JCDecaux for APN Outdoor emerged yesterday and investors wondered if it was a serious offer, or just some sort of business play.
APN Outdoor’s board told shareholders to take no action as they consider and try to work out if JC Decaux (JCD) is serious.
The APN Outdoor board said in yesterday’s statement that there is no certainty the bid would proceed given the conditions attached to the offer. The indicative offer (and non-binding, the usual ploy from someone playing rather than bidding) from JCDecaux, the world’s largest outdoor advertising company, was priced at $6.52 for each APN Outdoor share, an 11% premium to the close of trade price on the ASX on Wednesday.
That is hardly a knockout premium for control for a major rival in your sector. Just look at the 50% premium South32 is paying to get control of Arizona Mining and its higher attractive lead, silver and especially zinc mine in the US state of Arizona.
The conditions of the JCD bid include the granting of a six week exclusivity period to allow JC Decaux to do its due diligence on APN (standard), along with the negotiation of a scheme of arrangement and a requirement that APN Outdoor’s board unanimously recommend the scheme to shareholders.
Critically, another condition of the bid is that APN drop its bid to acquire competitor Adshel- that is a bit unusual, but understandable seeing if APN managed to buy Adshel, JCD would be ruled out on competition reasons.
APN and rival Ooh Media are in the midst of a battle for control of Adshel with offers around half a billion dollars. If APN was to drop its offer, Ooh Media would be the only bidder left standing and if it completes the transaction, it would bulk up and provide a large competitor to the combined APN Outdoor/ JCD grouping.
Further complicating JCD’s offer for APN Outdoor is the condition that the Foreign Investment Review Board and Australian Consumer and Competition Commission approve the transaction.
Those approvals are by no means guaranteed. In fact in may last year the Commission blocked the proposed merger of APN outdoor and Ooh Media on competition ground because the combined company would control much of the out of home advertising business in this country.
APN Outdoor and JCD would be smaller, but the ACCC will dust off its files from last May and take another look. This is why JCD wants the APN Outdoor bid for Adshel’s parent HT&E, to be dropped.
And then there is the battle over the City of Sydney outdoor ad contract, the biggest in the country. Tenders were called late last year and every major group is interested. JCD has it at the moment and recently grabbed the Yarra Trams contract in Melbourne from APN Outdoor.
Now Ooh Media and especially APN Outdoor are looking to do the same to JCD. Losing the City of Sydney contract would be a huge blow to the world’s biggest out of home ad group and would force significant cuts to be made to its Australian operations.
Bidding for APN could be a way of insuring that if it does lose the City of Sydney contract, (the results of the tender are due out soon) and APN is the winner, then JCD retains it – though at a considerable cost (which should tell us how valuable the contract is).
The bidding war for HT&E is getting convoluted. That company has revealed on Wednesday it has received two offers – one from Ooho Media which was a higher version of its April offer, with a price of $470 million, and another undisclosed offer.
Yesterday APN Outdoor revealed itself as the second bidder with the $500 million proposal.
“HT&E had offered to engage with [oOh!media] to enable it to more appropriately value Adshel so as to improve their price, including by providing further due diligence financial information subject to execution of a confidentiality agreement and on a non-executive basis,” the statement read.
APN Outdoor said yesterday its due diligence on the Adshel offer is still ongoing and believes the “proposal is an attractive opportunity for the company and its shareholders.”
So it’s not withdrawing yet and Ooho Media is continuing but JCD wants APN. That could see HT&E shareholders miss out on the extra $30 million, which won’t make them happy.
APN Outdoor shares rose 12.1% to $6.56 yesterday and HT&E shares were up 0.8% to $2.36.
