March 17 (Bloomberg) -- CBS Outdoor Americas Inc. filed to raise as much as $560 million in a U.S. initial public offering, the latest step in CBS Corp.’s plan to spin off the billboard division.
The unit plans to sell 20 million shares for $26 to $28 each, the New York-based company said today in a filing. Parent company CBS will own 83 percent of the unit after the IPO.
CBS Outdoor, which announced plans last year to convert into a real-estate investment trust, or REIT, said today that proceeds from the IPO will be used to help complete the conversion later this year, according to the filing. REITs don’t pay federal income taxes, with the understanding that they distribute at least 90 percent of taxable earnings to shareholders as dividends. The structure has become a popular tool to improve returns for investors and lower taxes.
The IPO would yield an equity value of $3.24 billion at the midpoint of the expected $26 to $28 share price range and 120 million shares outstanding. The company will have an enterprise value of $4.7 billion when accounting for $1.42 billion in net debt, according to an analysis by Bloomberg Industries.
“We’re spinning out our Outdoor business and we expect to do quite well with that,” CBS Chief Executive Officer Leslie Moonves said March 4 at a Morgan Stanley-sponsored conference. “We’re going to use a major chunk of that money to buy back our shares. So that in addition to what we’ve already stated is our share buyback program, it enabled us to state that we are buying back $2 billion worth of stock in the very first quarter.”
CBS Outdoor had 330,000 advertising displays in the U.S. at the end of last year. About 47 percent of the company’s billboards and transit displays are in New York while 13 percent are in Los Angeles, according to today’s filing.
The company said it operates in a “highly competitive industry,” in which it goes up against JCDecaux SA, the world’s largest outdoor advertising company, Clear Channel Outdoor Holdings Inc. and Lamar Advertising Co., the filing shows.
CBS Outdoor would be valued at 11 times 2014 earnings before interest, taxes, depreciation and amortization, assuming a 10 percent increase in 2013 pro-forma Ebitda of $386 million, according to Bloomberg Industries data. Lamar is valued at about 12.3 times 2014 Ebitda while Clear Channel Outdoor is at about 11.7 times.
Revenue at CBS Outdoor rose 0.7 percent to $1.3 billion last year while net income advanced 27 percent to $143.5 million, or $1.48 a share, according to the filing.
After completing the IPO, CBS Outdoor plans to pay a quarterly dividend of 37 cents a share, according to the filing.
To qualify as a REIT, a company has to invest at least 75 percent of its assets in real estate and obtain 75 percent of its gross income from rents or interest on mortgages from financing property, according to the National Association of Real Estate Investment Trusts, a Washington-based trade group.
CBS Outdoor intends to list its shares on the New York Stock Exchange under the symbol CBSO. Goldman Sachs Group Inc., Bank of America Corp. and JPMorgan Chase & Co. are among banks managing the offering.
CBS Corp., owner of the most-watched U.S TV network, rose 0.9 percent to $65.93 at 1:53 p.m. in New York. The stock had gained 2.6 percent this year through March 14.
To contact the reporter on this story: James Callan in New York at email@example.com