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CBS Outdoor Scores Big With IPO

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CBS Outdoor Scores Big With IPO

by , Mar 28, 2014, 6:18 PM
CBS Outdoor at the NYSEWall Street is bullish on outdoor advertising, judging by the results of CBS Outdoor Americas’ initial public offering on Friday.

The spinoff of CBS Corp.’s outdoor business exceeded analyst expectations, with the stock rising 7.5% from the IPO price of $28 to $30.10 as trading opened in the morning, before settling to $29.50 when trading closed, for a 5.3% increase by the end of the day. 

CBS Corp. is holding onto the majority of stock in CBS Outdoor as a publicly traded company, with 83% of shares remaining with the corporate parent.
 
The IPO sold 20 million shares in CBS Outdoor, raising around $560 million for the new, independent company. According to Wall Street watchers, the strong showing reflected investors’ belief that out-of-home advertising revenues will continue to grow thanks to digital billboards and growing skepticism about other traditional media, including broadcast and cable TV, which face disruption by ad-skipping technologies.
 
On that note, CBS Outdoor CEO Jeremy Male told The Wall Street Journal: “Most other media's audiences are declining or fragmenting. What we can say about our audience is that it keeps growing.” 

Male also pointed out that various external trends, like longer commuting times, also work to outdoor advertising’s advantage, often at the expense of other media. On the digital out-of-home front, Male told CNBC he plans to increase the company’s current network of 400 digital billboards by about 100 per year.
 
Funds raised in the IPO will be used to finance CBS Outdoor’s conversion into a real estate investment trust -- a corporate structure that should allow the company to avoid most federal income tax, as long as it pays out 90% or more of its earnings in the form of dividends to shareholders. In an earlier filing, CBS Outdoor revealed that it will pay shareholders a dividend of $0.37 per share per quarter after the REIT conversion.
 
CBS has been preparing for the spinoff of its outdoor division for at least a year. In July of last year, CBS Outdoor sold off its international division, including all its overseas properties except the Americas, to Platinum Equity for $225 million. Platinum beat out competing offers from Providence Equity Partners and GMT Communications Partners. Clear Channel Outdoor and JCDecaux previously dropped bids for the international division in April, partly due to regulatory concerns in Europe.
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