Yesterday Clear Channel Outdoor announced a sale of Europe North to Bauer Group for $625 million.  Here’s an analysis of the sale prepared and sponsored by SignValue.

Who is Bauer Media?

Bauer Media is a German conglomerate which operates more than 600 magazines, 400 digital products and 50 radio and TV stations. Although the company owns many media properties, the Clear Channel purchase is the company’s only OOH asset.  Bauer Media’s lead M&A adviser was LionTree Advisers. Reed Smith served as legal adviser. The company was also advised by OOH Capital, Deloitte and Herbert Smith Freehills.

The transaction doesn’t deleverage Clear Channel

At 6.25 times cashflow the sales price doesn’t reduce Clear Channel Outdoor’s leverage.  If you assume that all sale proceeds are applied against debt Clear Channel Outdoor’s leverage actually increases to 11.4 times.  We consider this as twice the sustainable rate of 6 times.

Now the real work starts…

The sale is a step in the right direction.  It removes low margin European assets which accounted for one third of Clear Channel’s capital expenditures.  It also removes management distractions.  Now the real work starts to reduce Clear Channel Outdoor’s leverage to a sustainable level.  Revenue growth will help but this also means expense cuts.  Clear Channel Outdoor’s cashflow margin is 28% post closing.  Lamar’s Cashflow margin is 44%.  Time for Clear Channel to make some hard decisions on personnel.

The US stock market was closed but in international markets,  Clear Channel Outdoor stock fell 3.5% on a day when the S&P 500 grew 0.16%, Lamar grew 0.23% and OUTFRONT fell 0.45%.  If you have questions contact Paul Wright, CEO, SignValue, paul@signvalue.com, 480-657-8400.

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