Ocean Outdoor shares begin trading with acquisitions on agenda

OOH company debuts with valuation of about £320m.

Ocean Outdoor shares begin trading with acquisitions on agenda

Ocean Outdoor’s shares have begun trading on the London stock market today, paving the way for the out-of-home media owner to raise money for takeovers.

The fourth-largest OOH player in the UK behind JCDecaux, Global and Clear Channel, Ocean is worth about £320m, based on its debut share price.

Ocelot Partners, a listed investment group, bought Ocean for £200m in March 2018 to be an "acquisition platform" to make further purchases in the OOH sector.

But it has taken 10 months to complete the "reverse takeover" and other formalities required for the shares to start trading again.

The shares are listed in dollars and reopened at about $7.50, lower than the $9.58 mark that Ocelot was trading at as an investment shell.

The stock price is expected to take time to settle as more shares change hands. 

Tim Bleakley, chief executive of Ocean, said: "The team is excited to have completed this process and to now be fully focussed on the future.

"We believe that our quoted status [on the stock market] provides an ideal platform from which to accelerate our growth ambitions."

The company added that it is looking at "further acquisitions", particularly in digital OOH, following its £32m purchase of Forrest Media in Scotland in June 2018.

Ocean, which sells advertising on sites including Land Securities’ Piccadilly Lights at London's Piccadilly Circus and the exterior of the Westfield shopping centres, said in its prospectus that it gets 89% of its revenue from DOOH – a high proportion compared with most of its rivals.

Bleakley and Tom Goddard, the chairman, have stayed at Ocean, after private-equity owner Searchlight sold it to Ocelot.

Bleakley has 311,000 shares or 0.58% of the company, while Goddard has 233,000 shares or 0.43%.

They are entitled to further performance-related shares if Ocean beats a "management hurdle", which requires the stock price to rise by 10% per year "on a compound basis" from a base level of $10 a share now by 2021.

The prospectus is bullish about the prospects for the UK’s £1.1bn OOH sector, pointing out that it has performed better than other traditional media in recent years because digital screens have fuelled growth.

DOOH has had a compound growth rate of 25% between 2015 and 2017 compared with 4% for traditional OOH, according to Ocean.

The company had £67m in annual revenue and £16m in profit before exceptional items in 2017, its most recent published results.

However, Ocean missed out on a wave of UK M&A in autumn 2018 as Global beat it in the race to acquire Exterion Media – one of the radio group’s three OOH purchases that also include Primesight and Outdoor Plus.

It meant the UK OOH sector shrank from six to four major players.

Global became number two with an estimated 32% share, just behind JCDecaux with about 36% and ahead of Clear Channel with around 18% and Ocean Outdoor with an estimated 8%.

Global’s purchase of Exterion is facing scrutiny from the Competition & Markets Authority, which launched an investigation in November.

Bankers expect further M&A moves as Clear Channel is poised to separate from parent company iHeartMedia and become an independent business on the US stock market in the spring.

Ian Whittaker, an analyst at investment bank Liberum Capital, which covers JCDecaux and German OOH rival Stroer, declined to comment directly on Ocean but said: "Digital is seen as a real game-changer in helping to expand overall OOH revenues by enabling the companies to dip into the digital pot of [advertiser] money."

Ocean’s prospectus reveals that it got 95% of its 2017 revenues from four media buying agencies: WPP’s Kinetic, Dentsu Aegis Network’s Posterscope, independent shop Talon Outdoor and Interpublic’s Rapport.

Aryeh Bourkoff, founder of media investment bank LionTree, and Andrew Barron, former chairman of Com Hem, a Swedish telecoms company, set up Ocelot with a plan to make acquisitions in European media.

The prospectus warns that Ocean saw a "softening" of the UK ad market in 2018 because of "macroeconomic factors", including "Brexit-related conditions".

Ocean was founded in 2005 when it got the rights to the exterior of the BFI Imax, a circular building at Waterloo roundabout in London.

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