InfoSpace Sells SwitchBoard.com to Idearc in $225 million Deal
Two large online directories will merge, and there could be a ripple in mobile. InfoSpace sold SwitchBoard.com and its other online directory assets to Idearc for $225 million, the companies said Monday. Idearc publishes Superpages.com and the Verizon Yellow Pages. Idearc said it will take on Switchboard.com’s existing distribution network. The companies hope to complete the deal at year-end, after shareholders and regulators sign off, InfoSpace said.
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The deal is a “traffic play” aimed at increasing Internet profits and opportunities for advertisers, Idearc CEO Kathy Harless said. “The demand from advertisers was greater than we could fill,” she said. In August, InfoSpace’s directories had 7.7 million visitors and Idearc’s Superpages.com had 21.3 million. The deal increases Idearc opportunities in mobile communications since it includes InfoSpace’s mobile directory assets, said Eric Chandler, president of Idearc’s Internet business. In March 2006, InfoSpace signed a deal with Sprint Nextel to jointly launch a cellphone-accessible directory.
“The sale of our directory business is part of the Board of Directors’ ongoing review of our company,” said InfoSpace CEO Jim Voelker. He said the deal offers his company tax benefits. InfoSpace will use some of its operating loss to offset “substantially all” the sale’s taxable gain. That means a larger cash return of sale proceeds for shareholders, he said.
The deal should produce $25 million in operating income and increase cash flow in the first year, Idearc said. The company will use cash and borrowings from an existing credit facility to make the purchase, it said. The deal shouldn’t affect Idearc’s dividend policy and should change the company’s debt load only a little, it said. Idearc expects operating benefits from using the Superpages.com infrastructure and cost base in the combined business, it said.
The deal doesn’t affect Idearc’s search engine partners, Harless said. Superpages.com has agreements with Yahoo, Google and MSN. Most of Switchboard.com’s traffic comes from search engine optimization, not search advertising, Chandler said.