In a deal that would create the world's largest outdoor advertising company, French conglomerate JCDecaux SA said Thursday that it is in talks to buy Russian rival News Outdoor Group from global media company News Corp.
Paris-based JCDecaux, already the world's second-largest outdoor advertising company, is negotiating with News Corp. over a possible cash-and-stock offer for News Outdoor in Moscow.
The Russian unit sells billboard advertising space in Russia, Poland, Ukraine and elsewhere in eastern Europe and in southeast Asia.
News Outdoor said JCDecaux will gain a controlling stake in the company and News Corp. will become a shareholder in JCDecaux.
If the deal goes through, JCDecaux would eclipse Clear Channel Outdoor Holdings Inc. of San Antonio, Tex., the globe's top outdoor ad firm.
In 2007, Clear Channel Outdoor posted revenue of $3.3 billion and net income of $246 million, or 69 cents per share. Last year, JCDecaux made a net profit of $308 million on sales of $2.94 billion.
Shares of JCDecaux fell 50 cents, or 3.2 percent, to euro15.21 in Paris on Thursday. In New York, News Corp. added 31 cents, or 2.2 percent, to close at $14.38, while Clear Channel Outdoor lost 7 cents to end at $14.92.
Wall Street would welcome a sale of Clear Channel's French and U.K. operations, which are plagued by "a weak French economy, unprofitable lines of business in the U.K. and regulatory issues in France," said David Miller, an analyst for Caris & Co.
But the acquisition means JCDecaux probably won't be interested in buying Clear Channel Outdoor's European operations, Miller said.
"The news today just adds juice to our thesis that JCDecaux would not seek to take over Clear Channel Outdoor's French and U.K. business," he said.
Soleil analyst Laura Martin said the current credit crunch, which has squeezed access to lending, also means JCDecaux won't be in a position to make another big acquisition.
She said JCDecaux has said it wanted to expand geographically, hence its interest in News Outdoor.
New York-based News Corp. had the Russian unit on the block since June 2007. Last month, Chief Executive Rupert Murdoch voiced fears his investments wouldn't be protected in Russia.
This week, Russian investigators raided the Moscow offices of News Outdoor and two production facilities as part of an investigation into negligence charges against a top official at the city government's advertising committee, which also was raided.
News Outdoor faces no charges in the probe. In June, city officials accused News Outdoor of receiving illegal discounts to gain access to billboards across Moscow from the advertising committee between 2002 to 2007. The city government demanded more than 200 million rubles in damages (more than $9 million), but its claim was rejected in court.
"We have great growing business there, but ... the more I read about investments in Russia, the less I like the feel of it," Murdoch said in August. "The more successful we'd be, the more vulnerable we'd be to have it stolen from us, so there we sell now."
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