Old media is still alive and kicking.
On its inaugural day of trading, CBS Outdoor Americas -- a billboard business, one of the oldest advertising mediums around -- shot up 5.4% over its initial price to close at $29.50 a share.
CBS Corp. offered 20 million shares of the new entity in Friday's initial public offering on the New York Stock Exchange. CBS had priced the stock at $28 a share -- at the high end of its target.
“The reaction so far has been positive so we're obviously very pleased,” Jeremy Male, chief executive of CBS Outdoor Americas, said in an interview.
For now, parent CBS Corp. is retaining roughly 80% of the billboard company. But the New York broadcasting behemoth plans to completely divest the unit by year's end. At that time, CBS Outdoor will be converted to a real estate investment trust, which carries tax advantages for investors.
The outdoor division has been a steady eddy within CBS, with revenue for the unit up slightly last year to $1.29 billion.
However, CBS wanted to shed its outdoor advertising business to help further diversify its revenue base and become less reliant on advertising, which can fluctuate along with the economy.
Still, the outlook for outdoor advertising has been bright. Industry-wide, outdoor advertising sales climbed 4.4% last year, according to Kantar Media, which tracks advertising spending.
"We are confident that we can keep growing our slice of the media pie,” Male said. “More people are connecting with media out-of-home with their smart devices. And people are eating out more and their commute times have gotten longer -- which has helped to drive our audience up.”
The conversion to digital signs also has helped fuel the sector's gains, Kantar Media said.
At CBS Outdoor, digital signs made up just 1.5% of its total signs -- but contributed 10% of the division's revenue, Male said.
“We're going to keep building our digital sign business,” Male said, adding that because digital signs can be updated quickly they are “far more timely and valuable” to advertisers.
CBS expects about $2 billion in proceeds from the IPO and an additional $1.6 billion, which was raised in January through a bond offering and debt financing for the outdoor business. Friday's trading placed the value of the CBS Outdoor shares around $3.6 billion.
After it divests the outdoor unit, slightly more than half of CBS revenue will be derived from advertising.