SPH takes $42m stake in leading HK billboard firm - Mar 29, 2006 (ST)

BackMar 29, 2006

The Straits Times / The Business Times News On SPH

SPH takes $42m stake in leading HK billboard firm

The 35% share in Li Ka Shing-owned company gives it a foothold in China.

By Vince Chong
Mar 29, 2006
The Straits Times

SINGAPORE Press Holdings (SPH) announced yesterday that it has invested US$26 million (S$42.3 million) for a 35 per cent stake in Tom Outdoor Media Group (OMG), China's leading owner of advertising billboards.

The OMG deal is the first major foray into the mainland market by South-east Asia's biggest media group and will help cement its outdoor media strategy.

Hong Kong-based OMG is a subsidiary of the Li Ka Shing-controlled Tom Group, which also has business interests in areas such as Internet, publishing and sports management across Greater China.

Assets under OMG include a billboard network spanning a whopping 300,000 sq m over 60 mainland cities, as well as street furniture and transport advertising outlets.

It is competing in the mainland outdoor media sector with international giants such as Clear Channel Communications and JC Decaux.

The company is valued at US$74.3 million, excluding a shareholder loan of US$30.8 million from Tom Group.

SPH chief executive (CEO) Alan Chan told a conference in Hong Kong yesterday that the investment represents an opportunity to make inroads into Asia's fastest-growing market.

'This is a notable business venture for SPH in mainland China, and in the outdoor segment, we have chosen a huge and accessible market that has the potential to provide healthy returns,' he said, adding that the deal was concluded after more than six months of negotiations.

'It is one of our key growth areas. After all, the outdoor advertising market in China is estimated to be worth about US$1 billion this year.' With the deal, SPH is entering a partnership with the country's largest player in outdoor billboard advertising, he added. OMG occupies a unique position in China, with its presence in 60 cities.

'SPH can leverage on its established customer database and contacts with marketing and advertising agencies to harness considerable synergies,' Mr Chan said.

Tom Group CEO Tommei Tong added that 'the partnership is a good starting point for cooperation' between the companies.

The HK group's outdoor advertising unit posted profit of HK$16 million (S$3.36 million) in its last financial year, down from HK$58 million in the previous period.

SPH's move follows the direction taken last year when it acquired a Singapore media firm and formed subsidiary SPH MediaBoxOffice. This now owns the country's largest outdoor advertising network of LEDs and plasma screens.

Outdoor media advertising is a new platform that SPH is investing in as another potential core business for the company, said Mr Chan. The new investment in OMG complements its stake in SPH MediaBoxOffice, he added.

'It's part of our ongoing efforts to offer more options and integrated marketing solutions to our clients, leveraging on our newspapers, magazines, Internet, radio and outdoor advertising,' he said.

SPH's executive vice-president for marketing, Mr Leslie Fong, told The Straits Times yesterday that the partnership with OMG is for the long-term and 'will be an important contributor to growth'.

He said: 'We bring to the table good connections with Singapore Inc, whose companies are continually seeking expansion on the mainland, as well as a portfolio of advertisers from blue-chip and multinational firms.'

The investment also diversifies the publishing group's revenue base as China's outdoor advertising market is estimated to grow at an annual rate of 15 to 20 per cent, he added. 'It is also a good time to invest in China's advertising market, considering major upcoming events like the 2008 Beijing Olympics and 2010 Shanghai Expo.'

Under the terms of the deal, Mr Chan and Mr Fong have joined OMG's board, which also comprises Ms Tong, Tom Group executive director Angela Mak and chief investment officer Michael Ng.

SPH will also have the right to name OMG's chief operating officer, deputy finance director and other key management positions.

Internal audit teams will also be sent in on a quarterly basis 'to ensure that SPH's financial interests are safeguarded', said Mr Fong.

The group's latest investment is not expected to have any impact on its performance for the current financial year. SPH shares closed unchanged at $4.44 yesterday.