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Inside the Deal: Outdoor advertising's manic deal-making week

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As Danielle Decaux celebrated her 80th birthday, she watched her son Jean-François, now co-chief executive of the French outdoor advertising giant she and her late husband Jean-Claude built, pursue one of the biggest transaction's in the company's history. And it was all the way on the other side of the globe.

JCDecaux's $1.2 billion deal to buy Australia's APN Outdoor capped off a manic week in the outdoor advertising sector. Here, There & Everywhere's Adshel was also in play, meaning there were four chief executives in three different countries hashing out negotiations to crunch a deal.

"It was probably the best birthday present I could give to my mother," Jean-François told the The Australian Financial Review.

JCDecaux's acquisition of APN Outdoor and oOh!media's deal for Adshel are waiting on the ACCC. 

"They both started the company. My father was a bill poster, and my mother was helping him to stick paper posters on billboards. They built the company together. When I was able to announce the transaction had been approved by the board she was delighted."

All understand the deals aren't over the line yet. The Australian Competition and Consumer Commission is set to pour over JCDecaux's takeover of APN Outdoor as well as oOh!media's $570 million acquisition of Adshel.

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JCDecaux is no stranger to the Australian market. It chose an organic growth path after establishing a presence ahead of the 2000 Sydney Olympics. That didn't mean it didn't take the odd glance – it ran the ruler over APN Outdoor in 2014 before it listed. But four years later, it could no longer afford to ignore consolidation in Australia's outdoor advertising sector or a chance to get into the billboard market, dominated by APN Outdoor and oOh!media.

​JCDecaux, APN Outdoor, oOh!media and Adshel are the four largest players in the Australian out-of-home advertising sector. The outdoor sector makes up just 6.1 per cent, or around $1 billion, of the total advertising pie in Australia of around $17.3 billion, according to PricewaterhouseCoopers.

In Europe, Decaux enlisted Goldman Sachs chairman of investment banking François-Xavier de Mallmann, commonly known as FX. In Australia, Goldman Sachs head of investment banking services Zac Fletcher, head of technology, media and telecommunications Adrian Lee and Sydney-based Herbert Smith Freehills partner Rebecca Maslen-Stannage were on board.

After it became clear Adshel was on the block and APN Outdoor was running hard at it with a bid in late May, JCDecaux needed to act quickly. It assembled its bid team and began work on Project Opera.

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For his own run at Adshel, and his quick pivot to engage with JCDecaux, APN Outdoor chief executive James Warburton would enlist long-time advisors Cadence Advisory managing director Garren Cronin and associate director Tom Stevens, Allens partners Tom Story and Julian Donnan. Later Morgan Stanley's Robert Mete and Luke Boeg would also be drafted in to what was dubbed Project Torch.

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Warburton had returned to the media sector with APN Outdoor on January 22 following a four-year stint at Archer Capital's V8 Supercars.

The former Network Ten boss and senior Seven West Media executive made clear he wanted to make a big impact in the outdoor sector by building up APN Outdoor. The company had struggled without a CEO for much of 2017 after the exit of long-time boss Richard Herring in September 2017. Herring's departure originally was due to a planned merger with rival oOh!media but he continued out the door even when that deal was nixed.

Warburton was candid about the company's need to do better when he took the job. APN Outdoor upgraded its guidance in May, following contract wins and renewals, and its shares were up nearly 40 per cent in the three months before JCDecaux's approach.

JCDecaux chairman and co-CEO Jean-Francois Decaux. Jessica Hormas

"It's real credit to the APN team," Mr Warburton said on June 26 after the deal was agreed. "There are a lot of good people here, they don't lose their ability, they just lose their confidence, it's just been about putting it back."

When APN Outdoor presented to JCDecaux late on Friday, June 22, oOh!media chief executive Brendon Cook was at lunch in London with his son, daughter-in-law and grandson, taking calls as his team in Sydney went through the final contracts on his long sought-after deal to buy Adshel, known internally as Project Hyperion.

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Cook founded oOh!media, then known as Outdoor Network Australia, in 1989 and has made the company one of the driving forces of consolidation in the sector, as well as comfortably more than doubling its share price since its second float in 2014. It was previously acquired and delisted in 2012 by Champ Private Equity.

Cook had long coveted Adshel. Street furniture was one of the missing pieces for oOh!media when Cook and his executive team drew up a plan of where they should expand the business back in 2011. However, Adshel and JCDecaux, who have the lion's share of the street furniture segment of outdoor advertising, had both not been for sale given their ownership structures.

oOh!media chief executive Brendon Cook. Louie Douvis

That all changed in 2016, when HT&E, then known as APN News & Media, bought out the 50 per cent of Adshel it didn't already own for $268 million from its international partner Clear Channel Outdoor Holdings.

HT&E chief executive Ciaran Davis has spent his tenure scaling back the business. The Irishman, who came to Australia in 2010 as chief executive of Australian Radio Network, reshaped HT&E's earnings profile, drastically reducing its exposure to declining areas such as print, which made up 60 per cent of revenue four years ago, exiting regional newspapers and spinning off its New Zealand business, NZME, to focus on the growth areas of outdoor, radio and digital.

Cook and his team believed Adshel was a more valuable asset than the market was giving HT&E credit for, even after it lost the Yarra Trams contract to JCDecaux. He believed the business would at some point be an acquisition candidate.

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oOh!media and HT&E began informal conversations six months before the first official approach for Adshel in April. For HT&E it was the starting gun that would kick off Project Valette – the company was happy to hold onto Adshel, but if the right price came it was on the table.

APN Outdoor chief executive James Warburton. Louise Kennerley

"We thought that's a sector we'd like to play in. We started talking to Adshel some time ago to see if there was any interest," Cook said on June 25.

Advising Cook was Macquarie Capital's Darren Keogh and Minter Ellison partners Con Boulougouris and Christopher Allen, while in HT&E's corner were Credit Suisse Australia chief executive John Knox, CSLA's head of corporate finance and capital markets Mark Dorney and Bakers McKenzie partner David Holland.

HT&E publicly rejected oOh!media's first approach in April, believed to be around $450 million, as undervaluing Adshel. It wouldn't be long before oOh!media returned with an improved $470 million bid in late May. But, APN Outdoor was moving quickly with a rival $500 million offer.

HT&E would run an official process with bids due Friday, June 22. Within two days of the looming deadline JCDecaux made its move, lobbing a $1.1 billion bid for APN Outdoor, which had been working hard on an all-cash offer for Adshel, even tapping Morgan Stanley and UBS for a $250 million to $300 million capital raise to fund a prospective offer.

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One of the conditions for JCDecaux's bid was APN Outdoor not proceed with a takeover of Adshel.

APN Outdoor knew it couldn't be out raising capital for an all-cash bid for Adshel with JCDecaux lurking. But it also didn't want rival oOh!media to get Adshel for a steal.

The Australian company's board also knew it needed to engage with JCDecaux because there was potential for a deal which could greatly benefit shareholders.

APN Outdoor would throw in a bid of $540 million for Adshel the morning offers were due, made up of $230 million in cash and a further $310 million in shares. APN Outdoor made its bid public, meaning it knew oOh!media would know exactly where it needed to get to, but it wouldn't come cheap. HT&E would publicly value the bid at $585 million.

HT&E chief executive Ciaran Davis. Christopher Pearce

HT&E took final bids at 6pm on Friday, June 22, and oOh!media's advisors Macquarie worked quickly to pre-negotiate and agree to commercial terms early on in the evening.

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With Cook on-call in London, the next 12 hours were spent fine tuning as oOh!media's chief financial officer Sheila Lines, group commercial finance director Chris Roberts and general counsel Maria Polczynski, finalised the deal with HT&E chief financial officer Jeff Howard, with Davis on call, and the two sides lawyers and financial advisors jumping in and out of Ubers, going between firms, all night. At 8am Saturday morning they signed contracts for oOh!media to buy Adshel for $570 million.

The potential deal which will see oOh!media finally entering the street furniture segment has Cook excited, while HT&E was ecstatic with the price, more than $100 million above the second approach made in May.

"We've demonstrated, if somebody wants to come in, we'll drive the best interest of shareholders," Davis said on June 25.

By this time, things were well and truly moving between JCDecaux and APN Outdoor.

At 10pm Friday night Warburton and APN Outdoor chief operating officer Andrew Hines were at Goldman Sachs in Sydney giving a presentation to Decaux and his management via video conference to the investment bank's Paris office.

Over the next four days, Warburton, Hines, APN Outdoor chief financial officer Philip Knox, finance general manager David Watkins and their advisors barely left Pyrmont, staying awake all hours as they negotiated with the French out-of-home advertising giant.

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Management and advisors from JCDecaux and APN Outdoor pulled multiple all-nighters, with time zones between Australia and France meaning somebody was working on the deal at all hours of the day. JCDecaux knew they didn't have to rush a deal with the Adshel process settled, but there was genuine desire from the French to do a deal.

APN Outdoor had been sprinting for almost three weeks, having run hard at Adshel up to Friday then continuing on as JCDecaux entered late in that process. On the fourth night of around the clock negotiations, the pair agreed to a $1.2 billion deal which was recommended by the APN Outdoor board – both parties walked away happy with the outcome.

Approval from the competition regulator is still pending and the ACCC's ruling is not being taken for granted – a provisional decision date has been set for August 30 on both transactions. There has been no big party or celebration, just getting back to business, while a bit sleep deprived, following a whirlwind week of deal making.

C'est la vie, as the French say.

Max Mason covers insolvency, courts, regulation, financial crime, cybercrime and corporate wrongdoing. A Walkley Award winner, Max's journalism has also received awards from the National Press Club of Australia, the Kennedy Awards and Citibank. Connect with Max on Twitter. Email Max at max.mason@afr.com
Sarah Thompson has co-edited Street Talk since 2009, specialising in private equity, investment banking, M&A and equity capital markets stories. Prior to that, she spent 10 years in London as a markets and M&A reporter at Bloomberg and Dow Jones. Email Sarah at sarah.thompson@afr.com

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