JCDecaux is a candidate to buy Clear Channel Outdoor’s international business but it depends on financing. A stock analyst asked JC Decaux CFO David Bourg about the company’s leverage last week and Bourg said this:
…in our business, we know that it is quite important to go back to a financial leverage at about 3 to 3.5 times when you do an acquisition. So if we do an acquisition where we should go above this ratio, the most important…discussion we will have with the rating agencies how long it will take us to come back to this level. And that’s why it’s not a straightforward answer because this is more or less at our credit rating today, where we should stand around 3.5 times. Now we can go above provided that we will be in a position to demonstrate that we will go back to this kind of leverage level quite quickly within 18 to 24 months.
Billboard Insider modeled a JCDecaux purchase of Clear Channel Outdoor assuming a purchase price of $1 billion or 12 times cashflow (EBIDTA). Twelve times was what Clear Channel sold a huge block of US assets to Lamar for in 2016. Looks to us like JCDecaux could buy Clear Channel Europe while keeping leverage to a level where it can get back to its target of 3.5 times debt/cashflow within a couple years.
Whether 12 times cashflow is a good price for Clear Channel Outdoor’s Europe business is another matter. JCDecaux paid a 17 times cashflow valuation when it bought out Clear Channel Outdoor’s Clear Media shares in April 2020 but Clear Media performance was severely depressed by covid.
If Insider were buying Clear Channel Europe he’d pay a lower multiple to Europe’s cashflow than he would for Clear Channel Outdoor’s roadside US billboard business. Billboards account for only 17% of Clear Channel Europe’s revenue. The rest is low margin street furniture, retail and transit with high operating costs and short access agreements. Here’s what the Clear Channel 10k says about Clear Channel Europe’s sector revenues and agreement maturities.
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