Outdoor Systems Displays How to Build a Big Billboard Firm
Pick a billboard along any highway, inside any mall and at virtually any street corner. Then take a look at who owns it.
Most likely, the little black-and-white logo centered at the top or base of the billboard carries these two words: Outdoor Systems.
In a two-year span, the Phoenix-based firm that describes itself as an out-of-home media company has become the biggest billboard company in North America.
Outdoor Systems Inc. now operates some 223,000 billboard and other ad postings that include transit shelters, subway and mall displays in 48 states and in 10 Canadian provinces.
OSI already owns the largest share of the 400,000-plus billboards that dot the nation’s interstate and federal highways, and it expects to get even bigger.
“We had 20 acquisitions in 1997,” said Tom Wisz, Outdoor Systems’ director of communications. “We focus on how we can improve in our existing markets and we continue to look for attractive opportunities to enhance what we have.”
The latest purchase came in April when OSI bought the billboard operations of Philadelphia Outdoor for about $52.8 million, including paying down some debt.
The deal included about 160 sites, primarily on expressways and bridges in the Philadelphia area, the country’s fourth-largest advertising market behind New York, Los Angeles and Chicago.
Outdoor Systems is estimated to reach about 75% of the nation’s population with billboards, posters and displays in 96 of the top 100 U.S. ad markets and seven of the top 10 markets across Canada.
The company began in 1980 with some 18,000 displays in Arizona, Texas, Georgia, Colorado, Kentucky and Louisiana.
“They’ve put together an incredible platform of outdoor assets and are a one-stop shop for outdoor advertising,” said industry analyst Gordon Hodge of San Francisco-based NationsBanc Montgomery Securities. “They’ve moved aggressively to acquire some big competitors. They really seem to have a vision for the industry.”
After going public in April 1996 and raising more than $37 million by selling 2.6 million shares of common stock, Outdoor Systems leapfrogged from No. 6 to the industry’s top spot four months later by buying Gannett’s Outdoor Division and its 160,000 display faces for about $690 million.
OSI, with 1,100 U.S. employees and 350 in Canada, reported $471 million in net revenue last year, including $159.4 million in the fourth quarter, a 68% increase over 1996. The record totals were partly due to the company’s purchase of 3M’s outdoor operation--National Advertising Co.--in August for $1 billion.
National was Outdoor’s No. 3-ranked rival, with 20,800 billboards and 2,400 poster panels in 38 states, plus 6,700 ad displays in U.S. malls.
OSI’s closest rival is Eller Media Corp. of Phoenix, purchased in 1997 by Clear Channel Communications Inc. for $750 million in cash and $400 million in stock.
“Outdoor is clearly No. 1, with Clear Channel a close second in terms of revenue,” said analyst Hodge. “They’re two very healthy, well-run companies. It’ll be interesting to see what they’ll do next.”
