Telstra Corporation Ltd has confirmed it has entered an agreement to sell a 70% stake in its directories business Sensis to United States based private equity firm, Platinum Equity.
In a statement to the Australian Securities Exchange, Telstra said the sale was valued at $454 million, and excludes the voice services business, but includes economic benefits to Telstra from services it will continue to provide to Sensis.
Telstra will retain a 30% shareholding in Sensis, which the telco said it now valued at $649 million.
Shares in Telstra were little changed on news of the sale. Telstra shares opened at $5.26, and by 1025 AEDT had fallen 0.1% to $5.255, against a benchmark index decline of 0.16%.
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.
Telstra chief executive officer David Thodey said he was committed to the new partnership and said it was a sound strategic fit for both parties.
“We have spent the last two years enhancing our print directories business with a rich set of digital directory offerings," he said.
"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."
Mr Thodey said 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."
Telstra said the transaction price was equal to 2.4 times Sensis’ fiscal 2014 forecast for earnings before interest, tax, depreciation and amortisation (EBITDA) after adjusting for the
voice directories business, which the telco will retain, as well as stand alone costs of operating the business.
Proceeds of Telstra's sale will be incremental to the group's fiscal 2014 free cashflow guidance of $4.6 billion to $5.1 billion.
Telstra said it expects to book an accounting loss on Sensis of approximately $150million subject to completion timing and adjustments.
Around $100 million 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 fiscal 2014.
After the completion of the sale, Telstra will record its future 30% share 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.
Mr Thodey said the company had run a competitive sale process to select the right partner to maximise the value of the business.
"The fact that we have retained a 30% stake in Sensis shows our belief it will continue to lead the market and deliver value to Telstra shareholders," he said.
"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."
Platinum Equity chief executive Tim Gores said the firm would be looking for new opportunities to develop the business.
"We will empower management's focus on the core directories business while evaluating and pursuing prospective new strategic initiatives," he said.
Sensis will continue producing and distributing the White Pages Directory as required under conditions of Telstra’s Carrier Licence.