I don’t have enough time to fully write about it, but here are some low quality notes for Yellow Media (TSX: YLO).
Yellow Media announced they are divesting their LesPAC Inc. business unit for $72.5 million in cash. The company basically operated a craigslist-type pour les Quebecois, pardon my mauvais Français! The company generated $12.7M in revenues for the 2010 fiscal year, so on first glance, a sale at 5.71 times revenues seems good. It would probably be a more depressing figure how much they spent to build the service, so it wouldn’t surprise me in the least that with the disposition of that business there would be another chunk of goodwill and intangibles off the balance sheet if they did have to purchase some technology in order to build the site.
Now if they can just sell the rest of their business at 5.71 times revenues, then they won’t have much of a debt problem anymore. Equity holders will get $15/share and everybody will be happy. Don’t hold your breath.
That said, $72.5 million is not an inconsiderable chunk of change and increase the chances the company will be able to chip away at its credit facility due February 2013. Preferred shares C and D are trading a shade lower, yielding 38% at the bid, while debentures are trading a shade higher on reaction to this news at roughly 29 cents on the dollar. The market continues to be deeply skeptical on the ability of YLO to pay back its debt and obviously this depends on whether the “transformation to digital” will be a profitable one or not.