Sometimes a deal looks so screwy, you’ve got to wonder what they’re thinking — such as a private-equity group buying a majority stake in AT&T’s Yellow Pages division.
This is the age of Google and Yelp and Groupon. Who ponies up serious cash for a buggy-whip business like phonebooks?
Well, it turns out Cerberus Capital Management isn’t as goofy as it might appear. According to Bloomberg Businessweek, about 422 million directories are still published annually, and businesses pay almost $7 billion to advertise in them.
AT&T’s Yellow Pages operation alone publishes 1,200 directories in 22 states. The Cerberus deal values the business at about $1.4 billion.
So even though phone books are gradually becoming a thing of the past, they still pay off like a slot machine for whoever owns them, and will probably continue doing so at least for a number of years.
In fact, AT&T’s Yellow Pages operation is valued at close to Yelp’s market valuation. Not bad for an old fossil.