After much speculation as to which US private equity firm would get its hands on the directory business of US telecomms giant Sprint, it came as a surprise to many that the buyer ended up being trade buyer R.H. Donnelley Corp.
The transaction sees the Sprint Publishing and Advertising Group being valued at nearly $2.3 billion, giving a multiple of over eight times forecast EBITDA for 2002, a ratio that left some analysts thinking that the private equity firms were outbid by the trade buyer. 'It's a pretty full price,' said one, 'and I'd predict that the financial buyers were not going to go beyond $2bn.'
R.H. Donnelley already worked with Sprint as the publishing partner for its directories so was an obvious alternative buyer when the telecomms company put the business up for sale. The deal will include a debt facilty provided by Salomon Smith Barney, Bear Stearns and Deutsche Bank, whilst it was also revealed that Goldman Sachs Capital Partners is investing $200m in R.H. Donnelley convertible preference shares which will also see it take two seats on the company's board.
A number of major private equity firms were said to be interested in the business, arguably the last major directories operation in the US up for sale, with names such as Clayton, Dubilier & Rice, KKR, Texas Pacific as well as noted directories consolidator Hicks, Muse [which bought British Telecomms' Yell operation] being linked to the discussions.
The deal is expected to complete in the first quarter of 2003.