BT agrees sale of Yell

After much speculation UK telecoms company BT has agreed the sale of Yell, its international directories business, to Apax Partners and Hicks, Muse, Tate & Furst for a total of GBP2.14 billion. The transaction includes the Yellow Pages and Business Pages in the UK, Talking Pages, and the US-based Yellow Book. It is expected that the deal will be completed by the end of June.

The acquisition, touted as Europe’s largest ever LBO, comprises GBP2.04 billion in cash and GBP100 million in interest bearing vendor loan notes. Merrill Lynch and CIBC are underwriting debt of GBP1.45 billion. The equity is provided by three Apax funds (Apax Europe IV, Apax Europe V and Apax Excelsior VI) and two Hicks, Muse, Tate & Furst funds (HMTF Europe Fund and HMTF Equity Fund V).

On January 29 BT announced it was reviewing its options for Yell, including the possibility of a demerger. The sale was confirmed in May as part of a fund raising and restructuring plan to reduce debts of GBP30 billion generated in an attempt to become one of the leading providers of third generation mobile phones.

Yell’s initial valuation was estimated at between GBP2.75 billion and GBP3 billion but the final price was largely determined by an Office of Fair Trading ruling that required the company to cap its advertising rate increases. Last year Yell reported profits of GBP163 million before tax and a turnover of GBP774 million.

Bidders for the company included trade buyers and other private equity houses. Doughty Hanson, Kohlberg Kravis Roberts and DB Capital Partners were among those thought to be interested.

Yell’s backers have already spoken of plans to make European and US acquisitions in the near future, pursuing a vigorous buy-and-build strategy. Meanwhile BT continues to sell various assets and has since announced the closure of the sale of its interests in Japan Telecom to Vodafone.

Rothschild and Morgan Stanley & Co advised BT, Clifford Chance advised Yell’s management team and Merrill Lynch acted for the acquirers.