Telstra to sell majority stake in Sensis for A$454m

Sale excludes voice services though.

Telstra announced it had entered into an agreement to sell a 70 percent stake in its directories business, Sensis to US based private equity firm, Platinum Equity for A$454million. The sale excludes the voice services business and includes economic benefits to Telstra from services it will continue to provide to Sensis. Telstra will retain a 30 per cent shareholding with Sensis now valued at A$649million.

Platinum Equity is a leading global private equity firm with a highly specialised focus on business operations and 18 years of success in acquiring and operating businesses which have been part of large corporate entities. Among the transactions Platinum Equity completed in 2013 were carve outs from AP Moeller Maersk, CBS, CheckPoint Systems, Emerson and Deutsche Post DHL.

Chief Executive Officer, David Thodey said he was committed to the new partnership and believed the agreement was the right strategic fit for both Telstra and Platinum Equity. He said the new partnership would maximise the value of the Sensis asset for Telstra shareholders.

“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,” said Mr Thodey.

“Platinum Equity will operate Sensis as a separate entity, giving it the focus it needs to extend and enhance
customer offerings and benefits in an agile digital world.”

The transaction price is equal to a multiple of 2.4 times Sensis’ FY14 forecast EBITDA after adjusting for the voice directories business (which is being retained by Telstra) and stand alone costs of operating the business. This is consistent with valuations for recent directories transactions globally. The sale proceeds of A$454million are incremental to Telstra’s FY14 free cashflow guidance of A$4.6billion to A$5.1billion. Telstra expects to book an accounting loss on Sensis of approximately A$150million subject to completion timing and adjustments. Approximately A$100million is expected to be included in the December 2013 half year results with the balance accounted for on completion, which is expected in the second half of FY14.

Post completion Telstra will record its future share (30%) of Sensis net profit after tax in its EBITDA. The value of Telstra’s retained shareholding incorporates the impact of debt financing for the acquisition. Platinum Equity Chairman and CEO Tom Gores said he was pleased about the strong relationship his firm has developed with Telstra. "We have had great collaboration with Telstra and we believe the partnership will provide Sensis a level of consistency that is good for the business as it transitions to a standalone enterprise,” Mr. Gores said.

Mr. Gores said the Platinum Equity team looks forward to working with management to drive the business forward.

“We will empower management’s focus on the core directories business while evaluating and pursuing prospective new strategic initiatives,” added Mr. Gores.