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APN, oOh!Media strike $1.6bn merger

AAP logoAAP 13/12/2016

APN Outdoor and oOh!Media have unveiled a $1.6 billion merger they hope will give them more firepower against outdoor advertising rivals JC Decaux, AdShel and QMS Media.

The deal, under which APN will combine with oOh!media by offering 0.83 APN shares for each oOh!Media security, sent shares in both companies soaring by more than eight per cent.

Brendon Cook, the oOh!Media chief executive who will lead the enlarged entity, said clients want "big audiences on scale" in a hugely competitive industry.

"Advertisers want more data, they want more great products continuously being developed, they want automation," Mr Cook told AAP on Wednesday.

"Most importantly, it's about the capability of growing the medium."

The outdoor advertising industry accounts for about 5.5 per cent of the total advertising industry, but Mr Cook believes it should rise to 8.0 per cent between 2018 and 2020.

Growth is expected across a whole range of categories, including roadside billboards, transport advertising, retail, airport, office and university media, he said.

"The roadside media business is the largest, followed by the combination of the transit and bus shelter market and then followed by the retail media market," Mr Cook said.

Mr Cook echoed APN chairman Doug Flynn's view that the merger offers "clear value" for all shareholders.

"The businesses bring together complementary asset portfolios across key formats in metropolitan and regional markets," Mr Flynn said said.

Mr Flynn and Mr Castle will retain their respective roles, while APN CEO Richard Herring will act as an advisor for two months after the merger before leaving.

The merger is expected to be completed in April 2017, subject to oOh!Media shareholder approval. No decision has been made on the enlarged company's name.

The companies say the merger will provide earnings per share accretion of 14.7 per cent for APN shareholders and 14.2 per cent for oOh!Media shareholders.

The combined group will have earnings of $171 million before synergies in 2016, and flagged cost benefits of at least $20 million within two years of the deal being wrapped up.

APN Outdoor chief financial officer Wayne Castle told AAP that the cost savings will come from back office functions, efficiency in production and installation processes as well as sharing joint systems.

The merged group will be the fifth biggest media group in Australia by market capitalisation behind REA Group, Seek, Carsales.com and Fairfax Media.

APN Outdoor also issued a brief trading update on Wednesday, forecasting annual underlying earnings and revenue growth for the year to December 31 at or modestly above the upper end of its guidance range of $84 million to $86 million and 8.5 to 9.0 per cent respectively.

APN Outdoor shares closed up 50 cents, or 9.2 per cent, at $5.90, while oOhMedia shares finished 43 cents, or 9.9 per cent, higher at $4.78.

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