“Much like newspapers, yellow pages directories have not participated in the broader advertising recovery as digital alternatives to print grow in importance,” said Fitch Ratings in its analysis of the deal.
AT&T didn’t announce a price for the deal, which will place its yellow pages business in a new company, YP Holdings LLC, owned 53% by Cerebus and 47% by AT&T. But Fitch estimated that Cerebus is paying $750 million in cash and $200 million in a note. The credit ratings agency said that’s an enterprise valuation multiple of 1.8 times 2011 EBITDA.
YP will include:
- Approximately 1,200 The Real Yellow Pages® print directory titles reaching about 150 million homes and businesses in 22 states;
- YP.com, a top 40 website according to a leading global digital measurement firm;
- The YPSM Local Ad Network, which includes more than 300 mobile and online publisher websites nationwide providing digital reach to more than 71 million monthly unique visitors; and
- The YPmobile® app, which allows users to search local businesses from their mobile devices.
“The 1.8x implied multiple is significantly below other valuation data points for the media space. The average media and entertainment market enterprise valuation has hovered between 6x-7x in 2012. Over the past 10 years, the sector’s low-end multiple is around 6.0x. Fitch uses an average distressed multiple for media and entertainment companies in its recovery analysis of approximately 5.0x,” said Fitch.
“The potential for pure-play directory companies to face a second round of bankruptcy reorganizations has been evident recently in their poor operating performance and the need to approach creditors for relief. Both Dex One and SuperMedia, which restructured under Chapter 11 and exited with streamlined capital structures in 2009-2010, have been forced to take the unusual step of completing distressed exchanges on their first-lien term loans. Both companies are strong candidates for a return to Chapter 11,” Fitch added.
RBR-TVBR observation: Something broadcasting sales reps should carry along to show to advertisers who still think there’s value in yellow pages advertising.