Australia's largest telecommunications company, Telstra, has announced that it will sell a 70 percent stake in Sensis, its directories business, to US private equity firm Platinum Equity for a total of AU$454 million.
Short of the AU$3 billion that Telstra was reportedly looking to sell the struggling business for, Telstra will retain 30 percent of Sensis, now valued at AU$649 million. Under the deal, Telstra will retain the voice services business.
Over the last two years, Telstra has attempted to reinvigorate the Sensis business, which has declined severely due to drops in advertising revenue for the White Pages and Yellow Pages as Australians switch to online to find business addresses. In the 2012-13 financial year, advertising declined by 11.7 percent to AU$1.3 billion.
Telstra announced in February last year that it would cut 648 of the 3,500 jobs in Sensis, in a move that would see 24-hour support outsourced and a reduction in senior and middle management positions. The Greens put forward a proposal to alter Telstra's carrier licence to force it to keep production of the directories in Australia, but this proposal was rejected by a parliamentary committee.
Today, Telstra CEO David Thodey said the investment from Platinum Equity 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," Thodey said in a statement.
Under the deal, Sensis will operate as a separate entity. Telstra said the agreement was 2.4 times Sensis' forecast earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the 2014 financial year. Telstra would book an accounting loss of AU$100 million for Sensis this year.
Platinum Equity CEO Tom Gores said that with new ownership for Sensis, the company would focus on its core directories business while also looking towards "new strategic initiatives".
Sensis will continue to provide the printed White Pages as per Telstra's carrier licence, and Telstra will continue to provide directory assistance and voice services.
Thodey and Telstra's chief financial officer Andy Penn will brief the media on the deal at 11am AEDST today.