Australian advertising business oOh!Media Ltd (ASX: OML) today announced the $68.5 million acquisition of Executive Channel International (“ECN”) in order to acquire ECN’s digital and CBD advertising presence.

Here’s what you need to know:

  • Acquisition to cost $68.5 million, funded by $60 million capital raising to institutional shareholders, $10 million in debt, and a Share Purchase Plan for ordinary ANZ shareholders
  • Trading halt today while the placement is conducted, at $4.75 per share, which is a 2.9% discount to yesterday’s close
  • Acquisition estimated to add $8 million in Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) contribution, or a +3% increase in Earnings Per Share
  • Shareholders on the register at close yesterday will be entitled to participate in a Share Purchase Plan for up to $15,000 of oOh!Media shares, also at $4.75 apiece
  • oOh!Media reconfirms previous guidance of EBITDA between $68 million and $72 million for Calendar Year 2016, excluding the impact of this acquisition

So What?

ECN’s digital CBD office tower and car park advertising looks to be highly complementary to oOh!Media’s existing operations, although the purchase price appears to be pretty hefty. A $68 million price tag works out to be around 8-9 times EBITDA, which isn’t too bad, but the expected EBITDA benefit also includes $3.2 million in expected cost savings. Excluding expected synergies, the price tag is more like 14 times EBITDA.

This is starting to get a bit pricey, although it does reflect the attractive nature of the advertising business and indeed, oOh!Media’s own valuation. Price aside, it does look to be a highly complementary acquisition and a natural fit for the company. If you like what oOh!Media is doing, this acquisition appears to be more of the same.

Now What?

The big question for retail investors is whether they should participate in the Share Purchase Plan. I wouldn’t be in a big rush to do so unless the size of positions in your portfolio is important to you. oOh!Media shares are pretty strongly priced and the discount is no greater than what you could likely achieve with a little patience between now and Christmas. For those finding oOh!Media too richly priced,  APN Outdoor Group Ltd (ASX: APO) could be a suitable alternative, after its shares crashed 30% in August.

How 1 Man Made 100x His Money After 50

Few know, that as Warren Buffett blew out the candles on his 50th birthday cake, he had just 1% of his current fortune. Think about it: At an age when most give up hope, Buffett was just getting started on the remaining 99% of his fortune. Goes to show you that it's never too late for you to potentially get rich. Which is why we've gathered the strategies we learned from Buffett, distilled them down to 11 simple lessons, and put it in an exclusive report for you to claim. Just click here to learn more about this handy investing guide.

HOT OFF THE PRESSES: Motley Fool’s #1 Dividend Pick for 2017!

With its shares up 155% in just the last five years, this ‘under the radar’ consumer favourite is both a hot growth stock AND our expert’s #1 dividend pick for 2017. Now we’re pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is enter your email below!

Simply enter your email now to receive your copy of our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2017.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our https://www.fool.com.au/financial-services-guide">Financial Services Guide (FSG) for more information.

Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.