RE: YELLOW NEWS...Dominion Bond rating Service confirms good rating after this aquisition:
"Dominion Bond Rating Service (“DBRS”) has today confirmed the stability rating of Yellow Pages Income Fund (“Yellow Pages” or the “Company”) at STA-1 (low), following the Company’s announcement that it has entered into a definitive agreement to acquire Trader Media Corporation (“Trader”) for a total consideration of Cdn$436 million, which will be financed through Cdn$301 million of equity issued to the vendor and Cdn$135 million of debt.
The acquisition is relatively small and does not adversely impact Yellow Pages’ financial profile. Trader is forecast to generate approximately Cdn$43 million in annualized EBITDA (no synergies included), which is expected to be accretive to unitholders after accounting for incremental interest costs, capital expenditures, and distributions.
DBRS notes that Trader’s classified advertising publications do not have the same pricing power or stability over an economic cycle when compared to directories. However, given the relative size of the acquisition, this should not impact the stability of cash flow generation to unitholders, when considering Trader will represent only 7% of consolidated EBITDA, on a pro forma basis. Further diversification away from directories (arguably the best media asset class in Canada) could put pressure on the STA-1 (low) rating.
DBRS notes that Trader publishes 65 classified advertising publications in Ontario, covering largely the automotive and real estate sectors (e.g. AutoTrader and New Homes) and hosts eight associated online websites. Combined, these assets have a weekly readership of one million, while the online assets have 400,000 unique weekly visitors. Trader is expected to generate approximately Cdn$133 million of annualized revenue and Cdn$43 million of annualized EBITDA, representing a 32% EBITDA margin. "