Months of speculation over Titan Outdoor's future were resolved last week when the media owner entered administration and JCDecaux swiftly bought the assets of the company in a pre-packaged deal.
Titan Outdoor was founded in the US in 2001 and first entered the UK market in March 2006, when it bought Maiden Outdoor for £49.6 million, of which £10.6 million was shares at 20p a share and £39 million was debt. Maiden was put up for sale after it broke its banking covenants and industry insiders blame its demise on the company's expensive contracts.
William Apfelbaum, the founder and chairman of Titan Outdoor, was already well known in the UK media industry. As the chairman and chief executive of TDI Worldwide, now CBS Outdoor, between 1989 and May 2000, Apfelbaum built up and sold off a successful outdoor media owner.
Titan took on the majority of Maiden's commercial contracts and although Titan managed to renegotiate some of the deals, most recently with Network Rail in April 2009, it was not prepared for the protracted slump in adspend.
Francis Goodwin, the former managing director of Maiden Outdoor, insists the Maiden contracts cannot be held responsible for Titan's demise. He says: "Titan picked up Maiden very cheaply but when you do a business plan, you expect revenue to increase every year. No one predicts a downturn."
The UK outdoor industry had 21 consecutive quarters of growth in adspend until the fourth quarter of 2007 and was not prepared for its fortunes to turn.
1. By autumn last year, Titan's parent, TO Holdings, was struggling to pay its global bank debt. In November, Titan decided to surrender the CIE rail contract in Ireland and pull its business out of the country but the Titan worldwide chief executive, Don Allman, said it had no plans to leave the UK. JCDecaux first had conversations with Titan's worldwide management before December last year. Though the UK chief executive, Jon Slatkin, attempted a management buyout financed by private equity companies, JCDecaux's offer for Titan was materially higher. It required Titan to enter into administration and meant JCDecaux bought the company's assets minus its liabilities.
2. Titan's portfolio includes media in rail, shopping and bus environments. Its most lucrative contract is the Network Rail estate, which was worth more than £40 million in revenue a year. Combined with Titan's other rail contracts, the estate claims to cover 90 per cent of rail journeys in the UK. Titan's retail assets include six-sheet contracts with Morrisons and Asda and a shopping centre portfolio of traditional six-sheets and a new digital network of 100 screens. Titan sold its large-format roadside billboards, 7,900 48-sheets and 700 96-sheets to Prime-sight in September 2009. Minus these roadside formats, Titan is estimated to have made sales worth approximately £40 million in 2009 and struggled to sustain a national sales force and management team.
3. Outdoor media is a consolidated industry: around 80 per cent of all spend is channelled through two buying points, and the five council members of the Outdoor Advertising Association generated the majority of outdoor revenues in 2009. JCDecaux's move for Titan will intensify this consolidation. The purchase of Titan makes JCDecaux the biggest player in the UK outdoor market. The WPP out-of-home specialist Kinetic estimates that with the addition of the Titan assets, JCDecaux accounts for approximately 29 per cent of the outdoor industry. According to Kinetic, CBS Outdoor accounts for 23 per cent, Clear Channel Outdoor for 22 per cent, and Primesight for 12 per cent. Smaller media owners comprise the final 14 per cent.
4. All campaigns booked through Titan before the sale will be honoured and initially Titan staff will continue to work from its Old Street offices. The two workforces will be combined at JCDecaux's headquarters in Paddington, London in the coming months.
Jeremy Male, the chief executive of UK, Northern Europe and Australia at JCDecaux, says there is no definite timescale for the transition and "specific decisions are still to be made". JCDecaux's sales team is divisional and the rail portfolio is likely to be run as a separate group. The Titan retail products will fit well with JCDecaux's retail estate and may be sold alongside them. Under Tupe, Titan staff members are employed by JCDecaux but it is likely that there will be some redundancies from the combined workforce.
WHAT IT MEANS FOR ...
- JCDecaux is now the largest player in the outdoor market yet agencies deny this is a problem for the sector. Jane Wolfson, the head of non-broadcast at the Interpublic agency Initiative, says the deal will benefit advertisers because JCDecaux should be able to "turn formats around and put greater investment in the products".
- But Wolfson adds: "It will be interesting to see what happens from a pricing perspective." Industry sources suggest JCDecaux's clout and selling power will push prices up for advertisers.
- The major specialists, Aegis Media's Posterscope and WPP's Kinetic, are said to have good trading relationships with JCDecaux. Some sources suggest that the specialists are likely to spend more with JCDecaux than they might have done with Titan because of their tighter working relationships and the terms JCDecaux trades on.
- The outdoor specialist market has consolidated too, raising potential question marks over its future in a more simplified market.
LANDOWNERS AND RAIL OPERATORS
- Titan Outdoor undoubtedly owed its commercial partners money and though landlords have lost out, the revenue generated for landlords through outdoor media is unlikely to be vital to their businesses.
- JCDecaux's Jeremy Male says: "Subsequent to JCDecaux's purchase of the assets of Titan Outdoor, JCDecaux is in discussion with all of Titan's franchise partners to discuss how we can work best together in the future."
- One industry source suggests they will see JCDecaux as a "safe pair of hands" because it is the only significant media owner not to be owned by a venture capitalist and is the only company "in the business for the long term".