Cerberus Talks To AT&T For Yellow Pages

AT&T Inc. is in talks to sell a stake in its Yellow Pages business to private equity firm Cerberus Capital Management LP in a deal that would value the entire telephone directory business at $1.5 billion, sister news service Reuters reported, citing Bloomberg.

The phone company is being advised by Citigroup Inc. and Bank of America Corp. and has had talks with several buyout firms, according to the story, which cited unnamed people familiar with the matter. AT&T, Citigroup and Bank of America declined comment. A representative for Cerberus did not respond by deadline to a request for comment.

AT&T took a 48-cent-per-share charge in the fourth quarter reflecting the falling value of its Yellow Pages division after the business had been declining for years. Telephone directories have been rendered increasingly obsolete as consumers instead go to the Internet to find local business phone numbers.

Randall Stephenson, AT&T’s chief executive, said in January that the directory business was one area he was “going to obviously take a very hard look at.” He told analysts on a conference call, “It’s one of these areas that we’re going to have to decide, do we keep it or do we restructure it as we move forward?”

The price tag implies a valuation multiple of about 1.5x 2011 EBITDA and 2x 2012 EBITDA estimates, according Bernstein analyst Craig Moffett. In comparison, AT&T’s rival Verizon Communications sold its directory business in 2006 for about 8x trailing EBITDA in a spinoff. “The window has already closed for selling Yellow Pages businesses at a meaningful price,” Moffett said.

(Sinead Carew is a correspondent for Reuters in New York.)