By Amy-Jo Crowley and Emma-Victoria Farr
LONDON/FRANKFURT (Reuters) -German group Stroeer’s sale of its multi-billion-euro outdoor advertising business has suffered a setback as two bidders balked at the asking price, amid worries over the country’s economy, three people familiar with the talks told Reuters.
Stroeer, Germany’s leading outdoor advertiser, is a bellwether of Europe’s biggest economy, which is deep in recession and uncertainty as it awaits the outcome of negotiations to establish a government.
Stroeer said in January it had received indicative offers from private equity investors for its “out-of-home” advertising business that is responsible for thousands of posters, billboards and digital screens across the country’s train stations, shopping centres and town squares.
It said the offers were significantly above the company’s overall market valuation of about 3 billion euros ($3 billion).
But in recent weeks, two potential buyers, U.S. private equity firms KKR and Hellman & Friedman (H&F), have left the talks because of a disagreement over price, the sources said.
They could not be named because the deal negotiations are private.
Stroeer shares fell as much as 14.3% before closing the session down more than 8%, their biggest one-day drop since March 2020.
Stroeer’s owners, including co-founder and co-chief executive Udo Mueller, wanted close to 4 billion euros, but the private equity bidders valued it closer to 3 billion euros after conducting initial work on it, the first person said.
KKR and H&F and spokesperson from Stroeer declined to comment on the departure of the two bidders.
However, the Stroeer spokesperson said “open-ended discussions with potential investors” continued and “additional interested parties have now joined us”.
“We are particularly satisfied with the development of our core business in the fourth quarter and also at the beginning of the new financial year,” the spokesperson said further.
UNCERTAIN ECONOMIC CLIMATE
The second person said the bidders’ withdrawal reflected the hesitancy of investors to make decisions until the country has decided on a coalition government, especially when the economy is so weak.
Advertising budgets are often the first target of companies seeking to cut costs, the sources noted.
Given the economic climate, it is unclear whether other bidders could step in and whether it will be possible to break up the group.
But one of the sources said conversations with KKR and Hellman & Friedman could restart if Stroeer lowers its valuation.
JPMorgan, which is advising Stroeer on the sale, is continuing to sound out other potential bidders, two of the people said.
JPMorgan declined to comment.
In the past, Stroeer has considered selling non-core assets, such as online cosmetic brand Asambeauty and its data gathering business Statista, Reuters previously reported.
Stroeer’s Mueller has a stake of 24%, while supervisory board member Dirk Stroeer has 20%, according to LSEG data. U.S. activist investor ValueAct also holds a 15% stake, the data shows.
Any deal for the out-of-home business would be structured so that Mueller would continue to hold a stake in the business unit and manage it, the company has said.
Stroeer’s OOH advertising unit reported 305 million euros in adjusted earnings before interests, taxes, depreciation and amortisation (EBITDA) in the first nine months of 2024, up from 21.5% from a year earlier, according to its latest results.
The entire group reported almost 420 million euros in adjusted EBITDA during the same period.
($1 = 0.9572 euros)
(Reporting by Amy-Jo Crowley and Emma-Victoria Farr, editing by Anousha Sakoui, John O’Donnell and Barbara Lewis)
