Telstra to sell majority stake in Sensis
Telstra will sell a 70 per cent stake in its directories business Sensis to US-based private equity firm Platinum Equity for $454m, the Telco has announced.
The sale posted on the ASX today will see Telstra retain a 30 per cent stake in the business, valued at AU$649m, and continue to profit from the services it provides to Sensis including voice services and directory assistance.
Sensis will go on producing and providing directory assistance services, according to the conditions of Telstra’s Carrier Licence, under the agreement.
In the last 12 months the division has looked to shed hundreds of jobs as it adjusts has attempted to adjust its business model. At its peak in 2005 the business was valued by some at $12bn.
Telstra CEO David Thodey said the deal was the right strategic fit for both parties.
He said the deal would maximise the value of the Sensis asset for Telstra shareholders and that Telstra had demonstrated its faith in Sensis by retaining the 30 per cent stake.
“Sensis has been an important business for Telstra shareholders and the cash flow generated by Sensis over time has contributed significantly to our ability to invest in the growth of our core telecom businesses,” he said.
“We have spent the last two years enhancing our print directories business with a rich set of digital directory offerings. Sensis is now the leading digital marketing services and directories business in Australia. To drive further momentum, we believe it is the appropriate time to introduce Platinum Equity, as a strategic partner.”
Thodey said Platinum Equity will operate Sensis as a separate entity, which will give it the focus it needs to extend and enhance its customer offering.
Tom Gores, CEO of Platinum Equity, said it will also provide Sensis with a level of consistency during its transition into a standalone business.
The transaction price of AU$454m is 2.4 times Sensis’ 2014 financial year (FY14) forecast EBITDA (earnings before interest, taxes, depreciation, and amortization) after adjusting for the voice directories business being retained by Telstra and the stand alone costs of operating the business. This is consistent with valuations for recent directories transactions globally.
Telstra expects to book an accounting loss on Sensis of approximately AU $150m with AU$100m included in the December 2013 half year results and the remainder falling in the second half of FY14.
At 2.4x EBITDA someone is going to clean up here…..
In a massive way.
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Let’s hope Telstra use some of the $454M to clean up their filthy public phone boxes. They are a disgrace and dot the entire continent. Amazingly these dirty booths all carry the Telstra logo. Not exactly good for the image of one of the nation’s biggest companies.
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As a former Sensis employee (2005-2008) I have observed the Sensis journey in recent years with interest.
Telstra have a stututory obligation to produce and publish White Pages directories (online and print) but not Yellow so whether they contract Sensis to continue this work will be interesting.
One of the strengths of Sensis/Telstra is its customer telephone database which if well maintained is a key value proposition compared to other ‘directories’ which for years have scraped listings illegally from Telstra/Sensis directories. Unfortunately Yellow Pages was beset with outdated and incorrect data to ‘bulk’ up the listings. The collaboration with Google and their maps and listings offering was a smart move. Given it is a private equity company can we expect a firesale of Sensis’ less performing offerings or real investment and maybe some hard decisions regarding the future of the traditional paper directory.
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This is a product in more pain than newspapers, and thats saying something.
$12 billion down to $650 Million… That is eleven and one third BILLION dollars lost….and still the poor sales staff etc will be getting hammered about missing budgets by a few bucks.
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