Here are excerpts from Clear Channel CEO Scott Wells comments that last week’s City 2024 Global TMT Conference, prepared and analyzed by SignValue
What’s been done and what’s still to do to right-size Clear Channel Outdoor?
At the beginning of 2022 we started the European part of it. Our goal was to sell the business as a platform and the Ukraine war frankly made that impossible… so we pivoted at that point and focused on…exiting some of the markets that had been more cash depleting during COVID and that were generally more challenging and we successfully did that…We kind of reinvigorated the Europe N sale process at the end of last year we have met pretty much anybody who is a perspective buyer…and we have a number of interested parties…I have not at any point given timelines… but I feel good that we have people who see value in the business…Latin America started considerably later…we started that process kind of the beginning of this year…we are talking to people who are familiar with doing business there
What’s driving the international spinoffs
The business model is very different. Tt’s very capital intensive…what happened in COVID illustrated the challenge of the business because we ended up seeing revenue dry up….For a highly levered company…going after kind of the highest margin highest growth prospect businesses is is the right way for us…
There were no international synergies.
Customers buy locally…I could point to like two or three campaigns over the last five years that that were truly bought globally. The laws are different in terms of what you can do with data and so as data becomes more important part of it that gets complicated. And then you have the whole regulatory regime…so you end up in audit committee meetings spending 20% of your meeting talking about 2% of the EBITDA…Not a good use of of your…board… it’s not a good use of the brainpower of your management…
Low tax basis assets in the US means that asset sales won’t reduce leverage
If you’re able to sell assets, it’s sort of 12 to 14 times…we have a low tax base we’ve been around a long long time and when you’re 10 times levered and you have to pay …20 to 30% tax…you basically descale the business without actually make any progress on the leverage…
A face is not a face is not a face when it comes to digital out of home
A bunch of weaker inventory comes in and becomes easy to buy and it’s cheap and buyers say oh i’m getting efficiency but they’re not really getting efficiency they’re just getting small screens…when you get down to some of those small screens the data is very dubious because you will have…some box – I’m not gonna criticize any particular thing – but some box with a small screen on it in customer service at a Walmart claiming credit for all the foot traffic in the Walmart. Really?
SignValue’s Take: No international synergies, low margins and management distractions (e.g. spending 20% of your time in a meeting talking about 2% of EBIDTA). Selling the international assets is a great move.
If you have questions contact Paul Wright, CEO, SignValue, paul@signvalue.com, 480-657-8400.
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