oOh! to acquire Executive Channel Network for $68.5 million through its subsidiary Inlink Group

oOh!media Limited has announced that it has entered into an agreement to acquire 100% of the share capital of Executive Channel International (ECN) for $68.5 million through oOh!’s wholly owned subsidiary, Inlink Group.

oOh! chief executive Brendon Cook (left) said the acquisition of ECN is an exciting opportunity for oOh! to expand its digital presence, particularly targeting the premium CBD audience that is highly valuable to advertisers.

Says Cook: “The acquisition will consolidate oOh!’s market leading position in the highly valuable CBD office segment. It is in line with oOh!’s strategy of driving engagement with audiences through a diversified portfolio of digital and classic screens in unmissable locations and will further enhance our digital market leadership. The combination of the businesses will deliver significant cost synergies and value creation opportunities.”

The ECN group was founded in Australia over 10 years ago. ECN operates a leading network of digital displays in CBD office towers and car park environments across Australia. The company has installations in over 280 different venues delivering real time content and advertising, and is underpinned by strong relationships with more than 110 property owners.

Cook said the acquisition is highly complementary to oOh!’s existing portfolio of products and audiences. The acquisition will further expand oOh!’s inventory, bringing the number of buildings under management between ECN and Inlink to over 630 and more than 3,500 displays across Australia.

Says Cook: “The acquisition further enhances our position as Australia’s largest reaching digital sign network and consolidates our number 1 position in the CBD office segment. This offering increases the value we can deliver to advertisers through greater reach and more efficient targeting of audiences.

“Combining ECN with oOh!’s existing product offering represents a valuable opportunity to leverage the strengths of the respective businesses and realise significant cost synergies. This will allow oOh! to build the most effective digital CBD platform to complement our existing diversified portfolio of assets to generate long term sustainable growth for our shareholders.”

ECN is forecast to contribute over $8 million of EBITDA to oOh! in CY2017 including approximately $3.2 million of estimated cost synergies forecast to be realised in CY2017, but before any revenue synergies, one off integration costs and transaction costs. The acquisition is forecast to be approximately 3% EPS accretive in CY2017.

Completion of the acquisition is conditional on certain matters which are considered by oOh! to be largely customary working capital adjustments and conditions precedent for a transaction of this size and nature, including that 100% of ECN shareholders sign up to a sale agreement. Shareholders holding a majority of shares have executed a sale agreement, with the balance expected to sign or alternately be dragged pursuant to the ECN Shareholders Deed. ECN shareholders have pre-emptive rights under the Shareholders Deed and it is a condition precedent to the transaction that no shareholder exercise their pre-emptive rights between signing and completion. All of the conditions precedent are expected to be satisfied by the end of October 2016. Additionally, a component of the consideration is subject to certain conditions customary for a transaction of this nature.

Capital raising

oOh! is undertaking a fully underwritten placement (the Placement) to eligible institutional investors, of approximately 12.6 million fully paid ordinary shares (New Shares) to raise $60 million to partially fund the acquisition of ECN.

The Placement price of $4.75 per share represents a 2.9% discount to the last closing price on 10 October 2016. The Placement bookbuild is expected to be completed today.  The Placement is expected to settle on 14 October 2016 and the New Shares issued under the Placement will be allotted on the following business day 17 October 2016. New Shares issued under the Placement will rank equally with oOh!’s existing shares.

No shareholder approval is required for the placement, as the company will utilise a portion of its existing placement capacity under ASX Listing Rule 7.1.

oOh!’s shares will remain in trading halt today while the Placement is conducted. Normal trading in oOh! shares is expected to recommence on 12 October 2016 or such other time as the completion of the Placement is announced to the market.

Share purchase plan

A share purchase plan (SPP) will accompany the Placement with eligible oOh! shareholders in Australia and New Zealand offered the opportunity to acquire additional shares in oOh!. The SPP will not be underwritten and participation in the SPP will be optional.

Shareholders on the oOh! share register at 7.00pm on 10 October 2016 (Record Date), with a registered address in Australia or New Zealand will be entitled to subscribe for up to $15,000 worth of oOh! shares through the SPP, subject to the eligibility criteria and other terms and conditions of the SPP which will be set out in the SPP booklet and dispatched to eligible shareholders in due course. Shares issued under the SPP will rank equally with existing shares of oOh!.

Trading commentary

oOh! reconfirms CY2016 guidance provided on 23 August 2016 of EBITDA of between $68.0 – $72.0 million. Guidance excludes the impact of the Acquisition that is expected to complete by the end of October 2016.