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The Kelsey Report® Advisory

Dex IPO to Shine New Light on Directories
Charles Laughlin,Neal Polachek , 5/21/2004

SUMMARY: Dex Media filed a registration statement on May 14 for an initial public offering (IPO) to raise up to US$1.5 billion, most of which will be used to pay down the company's debt. Dex Media will become the second U.S.-based pure-play public Yellow Pages company, along with R.H. Donnelley. Dex has not yet established a price for the offering. However, TKG estimates the deal will be valued at between 10 and 12 times earnings before interest, taxes, depreciation and amortization (EBITDA), which would mean a valuation of roughly US$9 billion to US$11 billion.

Dex Media, which combines Dex Media East and Dex Media West, finished 2003 with revenues of US$1.6 billion and EBITDA of US$907 million, an EBITDA margin of 55.6 percent. The Dex IPO should re-ignite investor interest in the directory space, particularly among institutional investors, which will have two U.S. directory pure plays from which to choose once Dex is listed. A strong Dex valuation could also prompt the major U.S. local telecommunications companies to take another look at selling or taking their directory divisions public.

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