THE PROPOSED $1.6 billion merger between Australia's two largest advertising groups, APN (ASX: APO) and oOh!media (ASX: OML) has been called off this morning, amid concerns the agreement would wash out competition in the out-of-home advertising industry.
The ACCC outlined its position earlier in the month that the merger would create an unmatched industry leader which would capture more than 50 per cent of the market, and even higher in some segments such as roadside billboards.
The parties have openly called into question the ACCC's judgment, accusing the watchdog of having a narrow scope of the market segment.
Both APN and oOh!media maintain that out-of-home advertising competes extensively and directly with other media channels, despite the ACCC's views.
Brendan Cook, managing director and CEO of oOh!media, says his company is "amazed" that the watchdog took up an adversarial stance, but that the companies would rather not spend time "educating the ACCC" and trying to change its position.
"oOh!media approached this transaction as a positive move for advertisers, agencies and landlords, and viewed the potential combination as an exciting opportunity for the media market," says Cook.
"We're amazed that in this day and age, the media market could be divided into narrow segments, and we cannot fathom how anyone could suggest a merger such as this could restrict innovation.
"So we don't agree with the ACCC position, but don't want to spend six to 12 months educating the ACCC or in court, especially as the media market is changing so quickly - hence our mutual decision."
Earlier in the month, the two media giants argued for the ACCC to view the merger proposal in the context of the entire advertising landscape. According to the companies, this would have meant the deal would only account for 5.5 per cent of the market.
Despite the outcome, Cook says both APN and oOh!media will continue to look for other ways to deliver innovative strategies that will increase value for shareholders.
"We remain focused on continuing to enhance the value of our innovative and established businesses and continue to deliver on and build out our clear strategy," says Cook.
"As always, we will continue to look for opportunities that align with our new media strategy and enhance shareholder value."
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