HM Capital Exits Directories Business

HM Capital Partners LLC on March 30 agreed to sell Canadian print and online directories publisher Canpages Inc. to Yellow Media Group Co., another directories company based in Quebec, for C$225 million ($220 million). The deal is expected to close early in the third quarter.

The exit brings to a close one of HM Capital’s last investments in the directories business, a once-popular sector for buyout firms that has faced serious challenges because of declining advertising revenue. The firm still owns a majority stake in Ziplocal, an Orem, Utah-based directories publisher.

“I wouldn’t say [directories businesses] are an active target at the moment,” Peter Brodsky, a partner at HM Capital, told Buyouts. “It’s an industry that faces its fair share of challenges.”

Nonetheless, Brodsky said the investment was “very successful” for HM Capital, though he declined to discuss the firm’s return in detail. The firm first invested in the company back in 2005 from Hicks Muse Tate & Furst Fund V LP, a $1.6 billion fund closed in 2002. Canpages, which employs about 700 people, publishes 84 printed directories and operates Canpages.ca, a search engine.

HM Capital’s strategy was to create a national, independent directories business similar to what Hicks Muse built in the United States via Yell Group Plc, a U.K.-based publisher of directories it partnered with Apax Partners to buy for about $3 billion in 2001. In 2002, Yell Group bought McLeodUSA Publishing, which established Yell Group as the largest independent directories publisher in the United States.

Brodsky said the firm achieved its goal with Canpages, quadrupling the company’s revenues thanks to several add-on acquisitions, initiating an online business which now reportedly accounts for about 23 percent of the company’s revenue, and building out Canpages sales and management teams. HM Capital had not been actively shopping the company, Brodsky said.

HM Capital was among several firms drawn to the directories business at the beginning of the decade. In September 2001, TPG bought the telephone directories unit of Norway’s Telenor ASA for around $666 million. In July 2002, an investor group led by The Carlyle Group and Welsh Carson Anderson & Stowe bought Qwest Communications’s directories business for $7 billion. And in 2004, Bain Capital, which was part of a consortium that bought an Italian directories publisher in 1997, bought SuperPages Canada, the Canadian directories branch of Verizon Communications, for $1.54 billion.