In the wake of Clear Channel Communications' $1.2 billion purchase of Eller Media Co., industry observers say they expect more deals linking radio groups and outdoor-advertising companies.
"It is an obvious move to become a total marketing entity. The synergies of outdoor and radio are extremely efficient," said Gary Fries, president of the Radio Advertising Bureau. "The trend today is selling marketing instead of media insertions, and both are very local media."
Nancy Fletcher, president of the Outdoor Advertising Association of America, agreed.
"There is a natural synergy for out-of-home media--outdoor and radio--to work together," she said.
Indeed, the Eller-Clear Channel pact, involving cash and stock, isn't the first union of outdoor with radio. In February 1996, Infinity Broadcasting purchased Transportation Displays Inc.
The Eller-Clear Channel deal is expected to close by early April. Karl Eller will remain chairman-CEO of Eller Media, while taking a position on Clear Channel's board.
FIRST DEAL TO TOP $1 BIL
The deal marked the first time an outdoor-media acquisition has topped the $1 billion mark. Eller paid half that much to acquire Patrick Media in 1995. The largest outdoor group was created last summer with the $690 million purchase of Gannett Outdoor by Outdoor Systems.
Third-ranked 3M Media now appears to be on the block, with several outdoor companies actively bidding for the division of 3M Co.
Industry watchers say that deal will be near the size of the Eller buy; both companies have close to $250 million in sales.
Mr. Eller said he expects some cross-media synergies with the Eller-Clear Channel combination. Early deals may focus on the Hispanic market; both media companies have a presence in Hispanic areas, such as in several Texas markets, and Clear Channel has a nearly one-third stake in Heftel Broadcasting, the Spanish-language broadcast group.
"There's some possibility for cross-media but it's not easy to do," Mr. Eller said.
While media buyers are concerned about the impact consolidation will have on ad prices, Mr. Eller said that because of aggressive pricing by rival Outdoor Systems, particularly in California, prices have fallen in many markets.
Lowry Mays, president-CEO of Clear Channel, said the company's interest in outdoor won't end with Eller.
"You'll see us looking at more outdoor," he said, adding that in the case of 3M, "at the right price, we would be a participant."
Mr. Mays also said additional radio acquisitions will probably be announced this month.
Copyright February 1997, Crain Communications Inc.