NEW YORK (Reuters) - Phone-directory company R.H. Donnelley Corp. (NYSE:RHD - news) on Monday said it agreed to buy Dex Media Inc. (NYSE
EX - news) for $4.2 billion in cash and stock, creating the No. 3 directory publisher in the United States.
Each Dex share will be exchanged for $12.30 in cash and 0.24154 Donnelley share. Donnelley, the smaller of the two directory publishers, will also assume Dex's net debt outstanding, expected to be $5.3 billion at year-end.
The deal, which is expected to close in the first quarter of 2006, comes after several years of change in the directory publishing business and carries a sale price slightly below the Dex's closing stock price on Friday of $27.79. But the shares have also risen about 15 percent over the last month.
When completed, the deal will create a company with business in 28 states and more than 600 directories with a total circulation of 73 million and is expected to save $50 million by the third year of the combination.
Shares of both companies fell on the New York Stock Exchange following the announcement. Donnelley shares were down 1.52 percent at $62.30 in late morning trading, while Dex shares were off 1.58 percent at $27.35.
Donnelley Chief Executive David Swanson will serve as CEO of the new company, which will be named R.H. Donnelley and continue to have headquarters in Cary, North Carolina. Dex is based in Englewood, Colorado.
Swanson said the "combination will create a company with the scale, innovative products and services and proven business processes to lead our industry into the era of integrated local commercial search, encompassing both print and digital platforms."
Dex CEO George Burnett will serve as chairman and current Dex shareholders will control about 53 percent of the combined company. Donnelley and Dex will appoint seven and six directors, respectively, to the 13-member board.
The deal is still subject to regulatory and shareholder approval, although Dex's majority shareholders, private equity firms Carlyle and Welsh, Carson, Anderson & Stowe are supporting the deal.
The two private equity firms led the purchase of Dex from Qwest Communications International Inc. (NYSE:Q - news) in 2003. Each put in $775 million in equity as part of a total purchase price of more than $7 billion.
Now, each firm will be allowed to appoint 1 of the Dex appointees to the board of the combined company.
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