• Sean Reilly on Fairway: We got exactly what we wanted.

    Here’s a summary of Sean Reilly’s comments from last Friday’s conference call announcing the $418.5 acquisition of 8,500 Fairway outdoor faces in North Carolina, South Carolina, Georgia, and Wisconsin.

    On how the transaction came together

    “We had looked at this property about 4 years ago and we were outbid by a private equity shop.  They have run it for the last few years and they decided to do an auction.  We decided not to go after all of the markets, some for regulatory reasons and some for quality of asset reasons.  We settled on the ones that for Lamar are the highest quality REIT qualified assets.  We were fortunate enough to get exactly what we wanted.”

    Comments on the Fairway Assets

    “We’ve got some markets and offices contiguous to some of these cities.  But in terms of offices, these are new…in Wisconsin we operate in a small market in Western WI called Eau Claire, and just south of Eau Claire would be LaCrosse.  The same sort of thing in North Carolina, we’re in Asheville North Carolina which isn’t too far away from Greensboro.

    “In some of these markets they are underinvested when it comes to digital…There’s a little bit of running room….We haven’t baked that into our numbers….Over time I think you’ll see digital grow in this footprint slightly faster than our overall footprint.”

    Lamar is at target leverage but will continue looking at acquisitions

    “With the close of this transaction on a trailing basis we are at 3.9 times.  We’ve announced an intention to stay below 4…We think we can get below 3.6 shortly.  Anything which would be transformational would mean issuing equity.”

    Insider’s take:  Reilly’s comments suggest the acquisitions are not pure tuck-ins where the contracts and steel are added but not the people.  Lamar expects to 4 million in cost savings.  This is approximately 12% of expenses for the acquired assets.  If this were a true tuck-in you might have seen cost savings of double that.   Good news if you are a Fairway employee in one of the acquired markets.

    The market liked what it heard.  Lamar closed up 0.6% to $68.45 on a day when Clear Channel Outdoor, Outfront and the S&P declined.

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