• Reilly: Lamar has $1 billion in dry powder for acquisitions

    Sean Reilly was cogent as usual at last week’s Wells Fargo media conference.  Here’s a selection of his comments.

    On the future

    We’re positioned very well.  It starts with audience.  People are spending more time stuck in traffic…commute times are getting longer…I don’t see that changing any time soon…A little bit of a tailwind from political…it has been helpful in our fourth quarter growth which we are seeing coming in at 5%.

    How are you positioned for the next recession?

    We’re in great shape…It wouldn’t be our first rodeo…In garden variety recessions we’ve never been down more than 2%.  We hold the line on pricing and suffer on occupancy and occupancy comes back later…We’re very resilient.

    On the rising importance of service customers

    Amusements, entertainment and sports have driven up the ladder.  It’s driven by digital.  Let’s promote Wednesday for the Saturday concert.  We’re extremely responsive to that need.  The concert industry used to use radio for that.  Now they use us…Another example is service…mostly lawyers.  They used to use the yellow pages a lot…They’re coming to us for brand building.

    On Driverless cars

    It’s going to be a brave new world.  There are a couple ways it plays to our strength.  We can ping your phone and have it show up when you’re not driving…We’re in the transit business.  People aren’t driving on the bus but we sell a lot of ads on the bus.

    On Transit and Airport Advertising

    We’re very middle market.  Out approach is to have a large portfolio of middle market contracts.  No one contract is going to make or break us.  We’ll do $90 million in transit and $40 million in airport advertising.  That’s 80 contracts which drive that revenue…When you’re hanging out in the middle markets it’s less competitive…The airport business is our lowest margin business…We’re going to make about 5% ebitda margin…It’s a cool environment to do executions.

    On billboard acquisitions

    The billboard business is very fragmented…For us these are fill-ins…We don’t have to worry about people and trucks…We’re just buying ground leases and ad contracts…In a typical year we’ll do $100 million in acquisitions…That’s equivalent to our free cash after obligations…Our goal is to bring them in at 10 times forward EBIDTA contribution.  That can look different from the seller’s perspective because we don’t have the expenses the seller has.

    Will the big 3 (Lamar, Outfront and Clear Channel Outdoor) consolidate?

    If it happens it will be next year or the year after.  The antitrust atmosphere is pretty tricky…I think you could see piece parts move around as between the big three…Whether 3 can go to 2 is a tricky question…We are for the most part middle market focused…If there’s one little hole in Lamarland it would be Los Angeles.  We don’t have a great presence there.  One day we may do something about that.

    On Lamar’s Target Leverage

    For the first time in our history we have investment grade paper in our capital structure…We’re going to stay there…We’re going to stay at or below 4.0 times leverage…right now we’re at 3.5…We initiated an ATM…in recognition of the fact that in doing more aggressive M&A we have to raise more equity…We have about a $1.0-1.2 in powder before we have to do anything.

    Insider’s take: Reilly didn’t mention Lamar buying Adams/Fairway but Insider notes that Lamar’s dry powder of $1.2 billion is almost twice the $650 million asking price for the Adams/Fairway assets.  Insider hears Adams/Fairway is being sold in regional clusters and bets Lamar wins one of more clusters.  Doubt the Justice Department would permit a Lamar Indianapolis purchase but the southeast US is another matter.  Insider also hears a Kevin Gleason led equity group is in the hunt.

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