Rivals walk away from CBS Outdoor unit

Private equity investors left in running for advertising business

Rivals to CBS Outdoor have pulled out of the formal bidding process for the outdoor advertiser’s international arm, leaving just private equity investors in the running to purchase the asset.

People close to the auction said about five private equity groups, including Providence Equity Partners, Platinum Equity and GMT Communications Partners, had proceeded to the second round of bidding. A sale, expected to be completed by the end of summer, could value the outdoor advertising business at €200m­-€300m, these people said.

JCDecaux and Clear Channel, rivals to CBS Outdoor, pulled out of this second stage given CBS’s desire to conclude a sale quickly and without splitting up its international outdoor business.

A purchase by either JCDecaux and Clear Channel would have raised regulatory concerns, particularly in the French and UK markets.

However both companies are understood to still be interested in picking up parts of CBS Outdoor should the company be split up in any sale.

Jean-Francois Decaux, co-chief executive of the family-run French outdoor group, told the Financial Times earlier this year that his company was interested in picking up assets from CBS Outdoor.

“This is not a must-do for us in Europe, but we could reduce the oversupply of billboards,” he said.

CBS Outdoor is looking to divest its international operations in Europe and Asia, covering key markets such as France and the UK, as well as Ireland, the Netherlands, Italy, Spain and China.

For potential buyers, one attraction will be its strength in digital outdoor advertising, such as poster-sized displays on street stands, following extensive investment in recent years.

“Their digital proposition internationally is as strong as anyone’s. They are pioneers and leaders in that field,” said Nick Mawditt, global marketing director at Kinetic Worldwide, a media buyer for outdoor advertising. “It’s just that they don’t have the scale of some of their competitors”.

CBS Outdoor is also dominant in London through contracts with the London Underground and the bus network and prime retail coverage at Westfield London and Westfield Stratford City, adjacent to the Olympic Park.

However, the London Underground contract, which is due to run until 2015, has proven controversial given the cost structure that was agreed with Transport for London in 2006. That deal was renegotiated last year but it is still understood to be lossmaking, according to potential buyers.

Earlier this year, CBS announced that it was shaking up its outdoor advertising business, which analysts value at $4bn or more. In addition to pursuing a divestiture of its operations in Europe and Asia, the company said it was converting its Americas division into a real estate investment trust.

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