JCDecaux and News Corp are in exclusive talks to combine some of their outdoor advertising activities, they said, a move that could create the world's largest billboard advertising group. JCDecaux, the world's number two outdoor advertising group after Clear Channel Outdoor, said on Thursday the deal would involve cash and shares. Both parties declined to give further details.
"The proposed transaction ... would result in a combination of certain of the assets of JCDecaux and NOG," JCDecaux said in a statement. NOG is News Corp's News Outdoor Group. A combination of the whole of the two businesses would create a company with annual sales of about $3.3 billion.
Paris-based JCDecaux is Europe's largest outdoor advertising group and has said it is keen on expanding in emerging markets, where News Outdoor is particularly strong, especially in Russia. Russian business daily Vedemosti said the two parties were talking about a sale of News Outdoor to JCDecaux for more than $1 billion, a price that unnerved JCDecaux shareholders, who sent the stock down more than 4 percent.
By 1204 GMT, JCDecaux shares were down 3.6 percent to 15.14 euros, off a low of 14.93 euros and underperforming the European media index which was down 1.6 percent. "There is some concern over the high price tag cited by some newspapers and the lack of details involving the deal," one sector analyst said.
JCDecaux Chief Executive Jean-Francois Decaux told the Reuters Technology, Media and Telecoms Summit in May that his group could raise around 1 billion euros ($1.4 billion) for a big acquisition without diluting the shares.
The company, which has a stock market value of 3.5 billion euros and annual revenue of more than 2 billion euros, has said it is keen on expansion in emerging markets both through organic growth and through acquisitions.
News Corp Chief Executive Rupert Murdoch, meanwhile, has recently expressed nervousness about investments in Russia, where News Outdoor generated the bulk of its revenues - $385 million - last year.
"We have great growing business there, but ... this is purely me, I'm sorry, the more I read about investments in Russia, the less I like the feel of it," Murdoch told reporters last month. Russian investigators briefly closed News Outdoor's Moscow offices earlier this week to search for evidence of criminal activity by a Moscow city official, according to the company, which said it was not itself the target of any investigations.
News Corp said in June 2007 it was exploring strategic options for News Outdoor.
The company has said its options include, but are not limited to, exploring the opportunity to expand News Outdoor's existing shareholder group through new strategic and private equity partners.
French daily Les Echos reported last month that private equity group Texas Pacific Group (TPG) had offered $1.65 billion last year to buy the unit, which is expected to achieve revenues of $500 million in 2008. Headquartered in Moscow, News Outdoor is the sixth largest out-of-home advertising company in the world, according to its website.
It has more than 4,500 employees and operates around 60,000 advertising displays in 11 countries in eastern Europe and Asia. News Corp does not break out News Outdoor's results separately but reports them under "Other" together with digital technology business NDS and Fox Interactive, which comprises its internet activities including social network MySpace. Together, these three businesses made operating profit of $42 million in the year to end-June 2008.
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