Infinity Broadcasting Corp., the radio subsidiary of CBS Corp., on Thursday said it would acquire Outdoor Systems Inc., the nation's largest billboard company, for $6.5 billion in stock.
The deal for Phoenix-based Outdoor Systems is the latest in a string of acquisitions of billboard companies by media firms hoping to round out the portfolio of opportunities they can offer advertisers. The deal, which is expected to close in December, also marks the latest of several media deals for Mel Karmazin, chairman of both CBS and Infinity Broadcasting.
Infinity plans to merge Outdoor Systems with its TDI outdoor advertising subsidiary, which controls more than 1 million public transit displays. The combination would create the world's largest outdoor advertising company.
During a conference call with Wall Street analysts, Karmazin said the deal would enable CBS to offer "'one-stop shopping" to major national advertisers. "There really is a lot of logic behind reaching people while they're in the car, hearing commercials and seeing the billboard."
Infinity isn't the only radio company with a strong outdoor presence. Phoenix-based Clear Channel Communications Inc., the No. 2 outdoor company, in 1997 acquired Los Angeles-based Eller Media. And, in 1998, Irving, Texas-based Chancellor Media Corp. acquired Paso Robles-based Whiteco Industries.
The ongoing consolidation isn't limited to the U.S. Eller last year acquired London-based More Group, one of the largest outdoor companies in Europe and Asia, and Sirocco, a French outdoor company. And the consolidation isn't over, observers say.
Chancellor Media recently hired the Morgan Stanley, Dean Witter & Co. investment banking firm to explore the possible sale of its billboard business, which analysts say could fetch roughly $2 billion. Observers also speculate that the latest deal could prompt such remaining independents as Baton Rouge, La.-based Lamar Advertising Co. to be snapped up by a larger media company.
Despite their low-tech image, billboards continue to be a popular vehicle for advertisers. It costs between $2,000 and $200,000 a month, depending on the location, to rent a billboard, according to Washington-based Outdoor Advertising Assn. Spending on all types of domestic outdoor advertising--including billboards, transit ads, bus shelters and airport advertising--grew by 9% in 1998 to $4.4 billion. Billboard operators lost a longtime customer this year when tobacco companies agreed to stop advertising their products on billboards. But tobacco advertising, which accounted for 39% of the industry's revenue in 1979, had shrunk to just 11.9% in 1998.
