Dex, new boss turn page
The purchase of the local firm for $4.2 billion will create the nation's third-largest phone directory company.
By Ross Wehner, Staff Writer
Denver Post
Tuesday, October 4, 2005

R.H. Donnelley Corp.'s $4.2-billion purchase of Arapahoe County-based Dex Media, announced Monday, will create the third-largest phone directory company in the U.S. and a stronger competitor to Google, Yahoo and other Internet search engines.

But it will also likely result in reductions to the 450-person workforce at Dex's glassy eight-floor office tower near the Park Meadows mall, analysts say.  Dex headquarters houses administration and information technology workers, the main areas of overlap with Donnelley.

"People who work at headquarters should polish up their résumés," said Janco Partners analyst Donna Jaegers.

Dex's employee base has shrunk from 3,100 in 2003 to 2,400 today, including about 1,100 in Colorado.  Many of Dex's other employees are in sales, which shouldn't be affected.

The new company will retain Donnelley's name and its headquarters in Cary, N.C.

Under the deal, which is expected to close early next year, Dex stockholders will receive $27.58 per share, more than half of which will be paid in stock.

Donnelley, which publishes yellow pages directories in 19 states, is smaller than Dex in terms of employees, revenue and cash flow.  Dex shareholders will own 53 percent of the new company, whose directory business will expand to 28 states.

But Donnelley will control the new company by appointing seven of the 13 directors on the board.  Its top three executives, the chief executive and the financial and operating officers, will keep their jobs.  Dex Media CEO George Burnett will be chairman of the new company.

In a conference call Monday, Donnelley's top executives predicted $50 million in cost savings after three years.

"It's too early to tell how we are going to combine both of these businesses," said George Bednarz, Donnelley's vice president of corporate planning.

Denver phone company Qwest sold its Dex directory business in 2002 to two buyout firms, Carlyle Group Ltd. and Welsh Carson Anderson & Stowe.

Those firms, which own 52 percent of Dex, will each make $1 billion from the sale along with proceeds from Dex's 2004 initial public offering.

Investors did not appear to be sold on the deal.  Donnelley's shares closed at $61.77, down $1.49, or 2.4 percent, on the New York Stock Exchange while Dex's fell 97 cents, or 3.5 percent, to $26.82.

The merger combines Donnelley's respected management with Dex Media's recent successes with Internet-based advertising, including relationships with the Yahoo and Google search engines.

"It's not compete against (the online search engines), it's work with them in order to share revenues with them," said John Kelsey, a yellow pages consultant in Princeton, N.J.

The Associated Press contributed to this report.

Staff writer Ross Wehner can be reached at 303-820-1503 or rwehner@denverpost.com.


http://c1.zedo.com/jsc/c1/ff2.html?n=162;c=542/105/1;s=76;d=16;w=720;h=300;t=UndertoneNetworks.com