Focus on oOh!media as private equity starts buying

Observers believe oOh!media is an obvious candidate for Nine. Picture: Richard Dobson

Private equity groups are back in the media space assessing possible buyout options, sources say, believing listed industry stocks now represent good buying.

There’s talk that meetings are being held with private equity participants keen to gain further understanding of assets they now perceive as cheap, with outdoor advertisers in particular focus.

It comes as oOh!media prepares to report its half-year results this week, with some suggesting management will be under pressure to demonstrate a recovery in earnings.

The outdoor advertiser is being singled out as particularly cheap, with its share price trading at about a quarter of what it was before the pandemic – about six times its earnings before interest, tax, depreciation and amortisation, compared to about nine times previously.

But any suitor of oOh!media may face competition from Nine Entertainment. It’s likely to sell its 60 per cent stake in Domain, leaving it cashed up and ready to buy assets with $1bn-plus ­proceeds.

Observers believe oOh!media is an obvious candidate for Nine, given it has looked at the business before and offers an opportunity to consolidate the media space.

The challenge will be convincing shareholders to take an offer far below what the once $1bn company was previously worth.

Its market value is now $680m, but it outlaid about $580m to buy rival Adshel from what was previously HT&E (now ARN Media).

A deal where shareholders could roll into the unlisted ownership vehicle may be to shareholder’s liking.

Southern Cross Media Group and Seven West Media could also be potential targets for private ­equity.

Meanwhile, with Nine facing the prospect of losing its financial powerhouse Domain, which added support to its share price, many market observers are suggesting that not gaining Foxtel was a missed opportunity.

A pay television provider and owner of streaming service BINGE, Foxtel, previously owned by Telstra and The Australian’s publisher NewsCorp, was sold to DAZN in Britain for $3.4bn at the end of last year.

Sources have suggested that Nine was interested in buying the business but was only prepared to pay about $1bn less.

OOh!media’s share price rallied on Friday, suggesting that many in the market are betting that buying the business will be Nine’s play.

It has over 35,000 assets across a digital and classic network that reaches over 99 per cent of metropolitan Australians and 72 per cent of metro New Zealanders every week.

An acquisition would round out Nine’s portfolio, adding to its STAN streaming service, free-to-air broadcasting service, radio assets and print media titles including The Sydney Morning Herald, The Age and The Australian Financial Review.

It would also provide cross-promotion opportunities with advertisers.

OOh!media, run by Cathy O’Connor, issued a trading update in December, saying it would be undertaking a restructure in early 2025 to simplify its operations and drive stronger performance, which it hoped would reduce its cost base by at least $15m.

The cost reductions would focus on operating and non-rent cost of good lines, more than offsetting the impact of inflation and additional business investment aimed at driving revenue growth.

The group expected to report adjusted underlying earnings before interest, tax, depreciation and amortisation for 2024 of between $125m and $128m before restructuring charges and costs, or between $116m and $121m after the adjustments.

Last year, oOh!media lost a key contract with Vicinity Centres. Its challenge is that it has a large portfolio of static billboards but advertisers prefer digital options.

Converting boards to digital requires large capital spending.