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The Kelsey Report® Advisory

RHD Wins Bid for Sprint YP Business
Charles Laughlin , 9/23/2002

Issue: Sales Agent to Become a Fully Integrated Directory Business

News: Yellow Pages sales agent and pre-press service provider RH Donnelly (RHD) has emerged as the winning bidder in the race to acquire Sprint Corp.'s directory business, Sprint Publishing & Advertising. RHD will pay $2.23 billion for the Sprint business, which represents a multiple of 8.6 times anticipated 2002 EBITDA.

That is higher than the 7.4 multiple paid on the recent QwestDex transaction. Sprint Publishing & Advertising is expected to generate 2002 revenues of $540 million and EBITDA of $260 million. As part of the transaction, Goldman Sachs Capital Partners 2000 will invest $200 million in RHD by purchasing convertible preferred stock. Goldman will take two seats on RHD's board of directors. Bear Sterns, Deutsche Bank and Salomon Smith Barney are financing the acquisition.

Sprint P&A; is currently the sixth largest U.S. Yellow Pages publisher, with 260 directories and distribution of 18 million. Sprint's largest markets are Las Vegas, Orlando and Ft. Myers, Florida. Sprint P&A; has 1,000 employees, 550 of which are in sales. Both Sprint and R.H. Donnelley are non-union companies. RHD is currently a sales agent for Sprint in 41 markets in four states.

Once the transaction is completed, which should occur by the first quarter of 2003, RHD will have revenue of $567 million on advertising sales of $970 million, compared with revenue of $73 million on sales of $605 million.

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