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Summary

  • Highly leveraged billboard REIT carve-out expecting to yield 5.5%.
  • Expected dilution per share to IPO investors is -$34.70, compared to a price range mid-point of $27.
  • Revenue for 2012 vs. 2011 was up only .6% and revenue for 2013 vs. 2012 was up only .7%.

Based in New York, NY, CBS Outdoor Americas (NYSE:CBSO) scheduled a $540 million IPO on the NYSE with a market capitalization of $3.24 billion at a price range midpoint of $27 for Friday, March 28, 2014.

The full IPO calendar is available at IPOpremium.

SEC Documents
Manager, Joint managers: Goldman Sachs, BofA Merrill Lynch, J.P. Morgan, Morgan Stanley, Citigroup, Deutsche Bank Securities, Wells Fargo Securities.

Co-Managers: BNP Paribas, Credit Suisse, Mizuho, RBS, SMBC Nikko, UBS Investment Bank, BNY Mellon Capital Markets, TD Securities, Barrington, Evercore, Guggenheim, Nomura, RBC Capital Markets, Drexel Hamilton, Lebentha, Loop Capital Markets, Ramirez, Williams Capital.

End of lockup (180 days): Wednesday, September 24, 2014

End of 40-day quiet period: Wednesday, May 7, 2014

Summary
CBSO is an highly leveraged billboard REIT carve-out expecting to yield 5.5%.

Marginal revenue growth
Revenue for 2012 vs. 2011 was up only .6% and revenue for 2013 vs. 2012 was up only .7%.

Highly leveraged
The expected dilution per share to IPO investors is -$34.70, compared to a price range mid-point of $27.

On January 31, 2014, CBSO borrowed $1.6 billion and paid the proceeds to shareholders, reducing equity and increasing interest charges.

In addition, most of the IPO proceeds are also earmarked for shareholders.

Valuation
Glossary

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

Cap (MM)

Sls

Erngs

BkVlue

TanBV

in IPO

CBS Outdoor Americas REIT

$3,240

2.5

22.5

2.4

-3.5

17%

Conclusion
CBSO is sweetheart deal for Sumner Redstone (see shareholders below), not necessarily for IPO shareholders.

The rating is neutral. The market likes dominant players even in slow growth markets.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business
CBSO is one of the largest lessors of advertising space on out-of-home advertising structures and sites across the United States, Canada and Latin America.

CBSO's portfolio primarily consists of billboard displays, which are predominantly located in densely populated major metropolitan areas and along high-traffic expressways and major commuting routes.

In addition, CBSO has a number of exclusive multi-year contracts that allow it to operate advertising displays in municipal transit systems where its customers are able to reach millions of commuters on a daily basis.

CBSO has displays in all of the 25 largest markets in the United States and over 180 markets in the United States, Canada and Latin America, including in some of the most heavily trafficked locations, such as the Bay Bridge in San Francisco, Sunset Boulevard in Los Angeles and Grand Central Station and Times Square in New York City.

CBSO believes that the location of many of its displays is a strategic advantage relative to other forms of advertising.

As of December 31, 2013, CBSO had 330,000 displays in the United States and 26,200 displays across Canada and Latin America.

The breadth of CBSO's portfolio provides its customers with a multitude of options to serve their varied marketing needs-for example, they can reach a large audience through national, brand-building campaigns (which Apple uses to market its iPhone and iPad products) or advertise by way of localized, action-inducing messages (which McDonald's employs to make drivers aware of its nearby restaurants).

For the year ended December 31, 2013, CBSO generated revenues of $1.29 billion, Adjusted OIBDA of $407.3 million, and operating income of $238.8 million.

CBSO believes that out-of-home advertising is an attractive form of advertising as its displays are ALWAYS ON™ and cannot be turned off, skipped or fast-forwarded, and that it provides its customers with a differentiated advertising solution at an attractive price point relative to other forms of advertising.

In addition to leasing displays, CBSO provides other value-added services to its customers, such as pre-campaign category research, creative design support and post-campaign tracking and analytics.

CBSO uses a real-time mobile operational reporting system that enables proof of performance to customers.

CBSO's large portfolio of displays and geographic reach allow it to serve a broad range of customers that includes consumer-focused companies in the entertainment, retail, healthcare, telecom, restaurant, financial services, travel and leisure and automotive industries.

During the year ended December 31, 2013, CBSO served 19,700 customers in the United States, including large, national companies such as Anheuser-Busch, Apple, AT&T, Diageo, Disney, McDonald's, Sony and Verizon, as well as regional and local companies.

During the twelve months ended November 30, 2013, 88 of the top 100 advertisers in the United States (as determined by Kantar Media Intelligence) were CBSO's customers.

As a result of CBSO's diverse base of customers, in the United States, no single industry contributed more than 10% of CBSO's revenues and no single customer contributed more than 1.7% of its revenues during the year ended December 31, 2013.

Dividend Policy
For the period commencing with the completion of this offering through the day immediately prior to the effective date of CBSO's REIT election, CBSO intends to pay an initial quarterly dividend of $0.37 per share.

This dividend amount is based on CBSO's historical results of operations and cash flows, and its pro forma results of operations. CBSO believes this financial information provides a reasonable basis to evaluate its ability to pay future dividends.

Competition
The outdoor advertising industry is fragmented, consisting of several large companies operating on a national basis, such as CBSO, Clear Channel Outdoor Holdings, Inc., JCDecaux S.A. and Lamar Advertising Company, as well as hundreds of smaller regional and local companies operating a limited number of displays in a single or a few local markets.

CBSO competes with these companies for both customers and structure and display locations.

CBSO also competes with other media, including broadcast and cable television, radio, print media, the internet and direct mail marketers, within their respective markets.

In addition, CBSO competes with a wide variety of out-of-home media, including advertising in shopping centers, airports, movie theaters, supermarkets and taxis.

5% stockholders
CBS Corporation 100%

CBS is beneficially owned by Sumner M. Redstone/National Amusements, Inc. ("NAI")/NAI Entertainment Holdings LLC.

Use of proceeds
CBSO expects to net $516 million from its IPO.

CBSO will transfer to a wholly owned subsidiary of CBS the Transferred Offering Proceeds, which is an amount equal to the net proceeds of this offering less an amount, as determined by CBS, equal to the estimated cash portion of the Purging Distribution(s). CBSO estimates that the Transferred Offering Proceeds will be $415.7 million.

Disclaimer: This CBSO IPO report is based on a reading and analysis of CBSO's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: CBS Outdoor Americas