DexOne, a directory company, merged with SuperMedia today in a stock-for-stock merger of equals. The new company will have a sales force of 3,100 and currently has relationships with 700,000 businesses. The combination is expected to generate $150 million to $175 million in annual revenue.
The move comes as yellow pages companies continue to struggle with an increasingly fragmented market and this combination gives the new entity a leading edge in owning the local business market, over large competitors such as Constant Contact, which reports to have 500,000 SMB clients. DexOne shares rose 35% on the news.
However, companies such as DexOne and SuperMedia have also struggled against an onslaught of innovative digital companies offering broader local marketing services beyond local directories, firms such as Yext, YP and UBL. These new entrants are grabbing market share and drawing sizeable capital infusions.
Relying on ability to take existing clients and re-sell them on other local marketing tools is a bet being made across the industry that is still unproven.
Of the two, SuperMedia has shown stronger growth in earnings, operating revenue decreased in Q2, while income was up significantly. SuperMedia’s market cap stands at $68 million, and DexOne’s at $93 million.
Upon closing of the transaction, Dex One shareholders are expected to own approximately 60 percent and SuperMedia shareholders are expected to own approximately 40 percent of the combined company.
In a press release, former CEO of SuperMedia, Peter McDonald, who becomes CEO of the new entity, said, “For the past two years, Dex One and SuperMedia have been on the same path of transformation, fully embracing digital media to help businesses grow through a complete suite of marketing solutions provided by our local consultants. Our common goal over many decades has been to drive results for local advertisers. By joining together, we will have nationwide presence to increase market share and achieve operating and service efficiencies.”