ACCC Says oOh!Media/APN Merger Not A Done Deal Yet And Warns Of Price Hikes For Agencies

ACCC Says oOh!Media/APN Merger Not A Done Deal Yet And Warns Of Price Hikes For Agencies
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In arguably the biggest media surprise for 2016, yesterday two OOH arch-rivals – oOh!Media and APN  – announced they had plans to merge and create a $1.6 billion outdoor behemoth and carve up Australia’s $12 billion a year outdoor market.

However, media reports this morning suggest the Australian Competition and Consumer Commission (ACCC) will be keeping a keen eye over any potential marriage due to the very real threat of reduced competition in the outdoor space and increased costs. The AFR has today reported that the merged company could control more than 55 per cent of Australia’s outdoor market.

In its submission to the Australian Stock Exchange yesterday, the merger plans show the business would be worth an estimated $1.6 billion and make it the fifth biggest media entity in Australia behind REA, Seek, Carsales and Fairfax.

If the merger gets the go ahead, APN shareholders will control 55 per cent of the company and oOh!Media shareholders 45 per cent. Each of the two will have four members on the new board.

On top of reduced competition, a likely merger would possibly mean advertisers would need to pay more to use the company’s assets. Good news for shareholders, less so for the rest of us.

The merger would also reduce the company’s overheads as it shared assets and reduced staff numbers.

Also, both businesses investment in digital has enabled them to get much more revenue from a single outdoor site by playing multiple ads. It’s been reported that a digital billboard can make as much as five times more than the old-fashioned static ones.

One thing that any merger does have in its favour regarding claims it would be anti-competitive is the smallish size of outdoor spend when compared to other medias. Even if the merger was approved by the ACCC and the new business did control 55 per cent of Australia’s outdoor market that still only represents about 2.5 per cent of all ad dollars spent in Australia.

And, as The AFR’s Tony Boyd wrote in a column today, we can probably expect a lot more media mergers as the traditional players fight the Facebook/Google juggernaut. As Boyd wrote: “The ACCC is likely to find that its review of the advertising industry prompted by the APN Outdoor and oOH!Media merger will be the first of many in the sector over the next 12 months.

“The drums are beating in relation to merger and acquisition activity. Irrespective of the progress of media law reform through the federal parliament companies are talking to each other with a view to merger activity.

These discussions are being driven by the same forces unleashed by Google and Facebook,” he said.

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