Infinity Broadcasting Corp.'s $6.5 billion agreement to acquire Outdoor Systems makes parent CBS by far the largest player in the out-of-home ad business and a multimedia powerhouse.
"With the exception of newspapers, we have covered very significant positions in all of the major media advertisers are interested in," Mel Karmazin, president-CEO of CBS Corp. and chairman-CEO of Infinity, told Advertising Age. "We think as time goes on, more and more advertisers will approach us on buying the whole package."
But media buyers expect a different result from the merger. With the outdoor advertising industry growing increasingly popular but also seeing continued consolidation, buyers expect ad rates to rise.
PRICES TO INCREASE
"There's going to be an increase in pricing," said Dave Yacullo, president of Outdoor Services, New York, a division of Western Initiative Media. "Outdoor Systems has been run as a very lean company, and they sold at top dollar. From CBS' perspective, they're going to have to get their money one way or another, and the customer is going to be the one footing the bill."
Allen Banks, executive media director, North America, for Saatchi & Saatchi, New York, agreed. "It doesn't help when one buyer owns as much as they own to get the best deal for our clients."
Infinity, a subsidiary of CBS Corp., already owns Transportation Displays Inc., the No. 4 outdoor company in the U.S. Combined revenue for Outdoor Systems and TDI was $996 million in 1998, almost double Karl Eller's Clear Channel Communications, which had revenue of $595 million last year.
In addition to $6.5 billion in stock, Infinity will also assume $1.8 billion in debt.
A DONE DEAL BY SEPTEMBER
The merger, if approved by the Department of Justice, will be completed by September. It will extend Infinity's media reach significantly, giving it a presence in all of the top 50 markets for outdoor, 33 of the top 50 for radio and 20 of the top 30 markets for TV.
"There is not another company in America that has that," said Mr. Karmazin. "We're dealing with national advertisers on our network, and to be able to say we can [also] give you billboards in every one of the top 50 markets is really powerful."
Copyright May 1999, Crain Communications Inc.