Telstra Sells Directories Unit Sensis for A$649 Million

Telstra Corp., Australia’s largest phone company, will sell a majority stake in its Sensis directories and business listings division to Platinum Equity LLC for A$454 million ($408 million).

The Melbourne-based company will retain a 30 percent share of the unit, valuing it at A$649 million, according to a filing today. That compares with the A$15 billion that former Sensis Chief Executive Officer Bruce Akhurst said it could be worth in 2005.

“This is clearly a very disappointing price but in terms of timing it’s well overdue,” Theo Maas, who helps manage about A$4 billion at Arnhem Investment Management Pty. in Sydney, said by phone. Platinum Equity will probably “gear up the business and run it for cash flow.”

Sensis has seen a 53 percent decline in earnings over the past three fiscal years, amid competition from online listings businesses including Google Inc. Telstra will book a A$150 million accounting loss on the sale of the business, with A$100 million of the total to be taken at half-year results due to be announced next month, the company said.

Shares of Telstra fell 0.2 percent to A$5.25 at the close in Sydney, compared with a 0.4 percent drop in the S&P/ASX 200 index. The sale excludes Sensis’s voice directories business, the company said.

Cash Flow

Directories businesses have been attractive to buyout firms for their traditionally steady cash flow, with KKR & Co. buying France Telecom SA’s PagesJaunes SA in 2006. Hicks Muse Tate & Furst Inc. and Apax Partners LLP agreed to purchase BT Group Plc’s Yellow Pages unit in 2001. Cerberus Capital Management LP agreed in 2012 to buy a majority stake in AT&T Inc.’s Yellow Pages directory division for about $950 million.

Sensis’s earnings before interest, tax, depreciation and amortization fell to A$571 million in the year ended June 2013 from A$1.22 billion in 2010, according to company filings. The division publishes the White Pages and Yellow Pages phone directories in Australia.

Akhurst said in a 2005 interview that Sensis could have been worth as much as A$15 billion if separately listed, based on analyst valuations at the time.

Deutsche Bank AG valued the unit at A$2.74 billion in a note to clients in April.

Unit Valuation

The valuation of the Sensis units being sold is 2.4 times forecast Ebitda, the company said.

The price represents a “very low multiple, which makes the investment hurdles a bit better for private equity,” Maas said.

Platinum Equity, based in Beverly Hills, California and founded by Tom Gores, also owns CBS Corp.’s former billboard and outdoor advertising business and Eastman Kodak Co.’s electronic image sensing division.

“The cash flow generated by Sensis over time has contributed significantly to our ability to invest in the growth of our core telecom businesses,” Telstra CEO David Thodey said in the statement. “The fact that we have retained a 30 percent stake in Sensis shows our belief it will continue to lead the market.”

Telstra has signed agreements over the past month to raise more than $2 billion from selling off units. The phone company on Dec. 20 announced the $2.43 billion sale of its Hong Kong mobile phone venture CSL to billionaire Richard Li’s HKT Ltd. The Australian company owned 76 percent of the business, with the balance held by Henry Cheng’s New World Development Co.

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