AT&T has finally decided to give up on its Yellow Pages business, selling its majority share to the private equity firm Cerberus Capital Management for nearly $1 billion, which seems like a big bet for Cerberus on a business in decline. But then, Cerberus has "staked its reputation on an ability to turn around businesses that are out of favor," Michael De La Merced writes in DealBook. The firm is paying AT&T $750 million and taking on $200 million of the telecom's debt for a 53 percent stake in the telephony directory service. The go-to comparison would be Verizon's directory spin-off Idearc, which declared bankruptcy in 2009. But Cerberus seems to think it can still find money in the Yellow Pages.
As the Associated Press points out, phone books have declined but not died out: "Phone books were once a cash cow, generating reliable profits as businesses paid for ads that were right under consumer’s finger tips as they were looking for local stores and services. Even with the steep revenue decline, AT&T’s Yellow Pages unit has been profitable before impairment charges for the last three years." And as The Boston Globe's Robert Weisman pointed out in 2010, Cerebus has a history of quietly buying struggling companies that it sells for a profit: "They range from the Alamo and National rental car companies, both of which it sold to Enterprise Rent-A-Car, to plasma medicine company Talecris Biotherapeutics, which it took public in an initial public offering."
Of course, as Weisman points out, Cerberus also invested in Chrysler and GMAC and had to get a government bailout on those, so it's not always a soothsayer. But this Yellow Pages buy at least means you probably haven't seen the end of those massive tomes that litter your doorstep every few months.