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Wednesday, October 18, 2006

Verizon's Spin-Off of Yellow Pages Approved, But Is It Good For Holders?

Verizon (VZ) approved the planned spin-off of its Yellow Pages unit, which encompasses print and online yellow page directories. This will be a new separate public company called Idearc, Inc.

This will be declared as a dividend of 1 share of Idearc common stock for every 20 shares of Verizon common stock held as of the close of business on Nov. 1, 2006. Subject to the satisfaction of certain conditions, the distribution will occur on Nov. 17, 2006, and is expected to qualify as a tax-free distribution. Stockholders who own fewer than 20 shares of Verizon common stock (or who do not own multiples of 20 shares) will receive a taxable cash payment in lieu of a fractional share to which they would be entitled.

Verizon doesn't anticipate any dividend changes for its VZ common stock. Verizon currently expects that a “when issued” public market for Idearc common stock will begin on or about Nov. 2 on the New York Stock Exchange (NYSE) under the symbol “IAR-wi.” Following the spin-off, Idearc common stock will trade under the symbol “IAR.” If a Verizon stockholder sells shares of his or her Verizon common stock (which trades on the NYSE under the symbol “VZ”) in the regular way market on or prior to the distribution date, the shareholder will also be selling the right to receive shares of Idearc common stock in connection with those shares.

Idearc will be headquartered in the Dallas/Fort Worth area and have approximately 7,100 employees. After the spin-off, Idearc and its subsidiaries will continue to operate the domestic directories publishing business previously operated by Verizon.

It really looks like Verizon may be doing a disservice here by issuing as little as "1" share. Verizon has 2.89+ Billion shares, and this should result in 144,500,000 share outstanding for the new company. There will potentially be such a large flood of 5 shares and 10 shares issued that holders would lose 20% just selling them through their broker after commissions. Oh well, most companies don't care about the little guy anyway. That looks to be the same here.

Verizon shares are lower on the day by 0.5% at $36.40.

The full release can be seen here.

Jon C. Ogg
October 18, 2006

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