August 14, 2014 01:00
By WATCHIRANONT THONGTEP
VGI GLOBAL Media will have almost half of the Bt10.2-billion out-of-home advertising-media business after acquiring shares in Tong Hua Communications, which will become a major shareholder of another outdoor-media operator, Aqua Ad, according to industry
Because of high competition in out-of-home media business due to changes in technology, Aqua Corporation decided to diversify its risk in outdoor advertising by selling a 74-per-cent share in its subsidiary Aqua Ad to Tong Hua Communication.
After adjusting its business structure, Aqua Ad will engage in integrated services ranging from outdoor to indoor media, as well as producing advertising banners with Tong Hua, which is also allocating 640 million ordinary shares at the offered price of Bt1.431 per share to VGI Global Media.
Rewadee Whanchid, assistant managing director of Aqua Corp, said yesterday that the company agreed to dispose of 299,278,748 ordinary shares of Aqua Ad, accounting for 74 per cent of total paid-up shares with par value of Bt1 per share at the selling price of Bt2.773 each for total value of Bt829,951,645 to Tong Hua Communications. The value of the disposition was about Bt829 million. The transaction will be completed by September 22.
In a statement to the Stock Exchange of Thailand, the company said it would be able to diversify its risks in outdoor advertising, as the market was shifting to digital media, which requires high investment while there is high competition.
Rewaddee Rewadee said her company would have additional cash to invest in its subsidiary Thai Consumer Distribution Center to expand warehouse capacity, which generates more stable revenue, or to invest in other businesses that offer good returns while diversifying risk.
By entering this transaction, the company will gain capital of about Bt506.72 million.
As part of this transaction, VGI Global Media acquired 27 per cent of Tong Hua’s paid-up capital after a capital increase through private placement. Tong Hua will then approve Aqua Ad entering a connected transaction for a management contract with VGI Global.
An analyst at Maybank Kim Eng Thailand said VGI Global Media would become a major out-of-home ad-agency network with almost 50 per cent of the market after acquiring shares in Tong Hua Communications, which holds 74 per cent of Aqua Ad. VGI will also manage 144 billboards for Aqua Ad.
On May 12, VGI Global Media acquired 24.43 per cent or 73,500,000 shares at a par value of Bt1 per share of Master Ad from existing shareholders, worth Bt9 per share, totalling Bt661.5 million. On February 5, the company sold a 70-per-cent share in its subsidiary VGI Multitech International to Delight Multimedia as the condition for entering into a joint venture to have the right to manage billboards under the Expressway Authority of Thailand. VGI still holds 30 per cent of Delight Multimedia.
Surachet Bumrongsuk, country manager of Kinetic Worldwide (Thailand), the country’s leading out-of-home media agency, told The Nation that this was a win-win deal between VGI Global Media and Aqua Ad. They were key leaders in the out-of-home business.
Under this deal, they will be able to synergise and consolidate their assets in terms of outdoor space for their clients. Meanwhile, outdoor media in some areas have to be converted into digital screens from traditional billboards in order to expand client numbers.
In the first half of this year, the number of out-of-home digital screens increased by about 10 per cent from 1.8 billion in the same period last year, reflected by significant spending on transit media on both the BTS Skytrain and MRT subway as well as in offices, airports and shopping malls and on roadside screens.