Credit: Pete Alexopoulos via Unsplash
Shareholders of oOh!media will do well to take the money offered by I Squared Capital, an independent global infrastructure investor, according to analysts.
The sharks, in the form of private equity firms, have been circling the leading Australian-born outdoor media player for some months now.
Others included Pacific Equity Partners and Oaktree Capital Management.
Pacific Equity Partners first approached the company in late April with an unsolicited $1.40 per share cash offer.
I Squared Capital followed with a $1.45 per share proposal in May.
And the bidding hit $1.60 and then $1.65.
These early proposals were described by market analysts as opportunistic.
Analysts had pointed to a gap between takeover pricing and longer-term valuation assumptions in the out-of-home advertising sector, alongside weaker near-term advertising conditions.
Market analysts have been long upbeat on the outdoor media sector and see more upside for oOh! if it can gain more market share.
However, the advertising market is currently soft, with global economic winds turning foul.
And oOh! has a new CEO, James Taylor, the former managing director of SBS, who is only just getting started on plans to lift the company’s performance.
The board of oOh! pushed back until one of the private equity firms upped the ante, not quite to the level that QMS got when Nine Entertianmnet bought it.
Private equity shop Quadrant sold QMS, with about a 15% share of the outdoor advertising market, to Nine for $850 million.
That sale was done at 7.8 times QMS’ forward EBITDA (earnings before interest, taxes, depreciation and amortisation).
oOh! shareholders will be paid $1.68 cash per share and an interim fully franked dividend of 2 cents cash per share (which they would have received without the takeover).
This gives oOh! an equity value of $898 million and an enterprise value of $1.04 billion.
At $1.68, the cash offer values oOh! at 7.2 times Morningstar’s forecast 2026 EBITDA and just 8% above the $1.55 stand-alone fair value estimate.
In a note to clients, Brian Han, director at Morningstar, who has been following the deal closely, penned a headline: “Time to End the Circus”.
“Given its binding nature and the board's full endorsement, we expect the deal to be consummated and, as per convention, no resistance from the independent experts,” he said.
“We could kick up a fuss and stubbornly stress the relatively low acquisition multiple and slim control premium, at a time when the no-moat group's earnings are grappling with bumpy economic conditions and ongoing Middle East tensions
“On balance, however, shareholders are better advised to take the money and get off the roller coaster that is oOh media's shares.
“There is only so much the longer-term structural tailwinds for outdoor advertising can be trumpeted, amid pervasive near-term concession and cyclical concerns.”
I Squared, in a statement, said the deal fits its strategy of investing in scaled network businesses with established revenue bases, durable competitive advantages and long-term growth potential.
“oOh!media represents the type of infrastructure platform we seek to invest in - a market-leading business with high-quality assets, long-term contractual foundations and attractive growth opportunities,” said Harsh Agrawal, senior partner at I Squared Capital.
“We look forward to partnering with the management team to build on the company’s market leadership, accelerate the digitalisation of the network and create long-term value for customers, communities and our investors."
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