Macquarie triumphs on Yellow Brick Road

Macquarie Capital Alliance, the investment arm of the Australian bank, has successfully won the auction for Yellow Brick Road, a European directories business, for €1.825bn (US$2.3bn) in a deal that has led to intense speculation about its target returns.

Alongside Macquarie in the winning consortium are Canada’s Caisse de Dépôt et Placement du Québec and Nikko Principal Investments, the European private equity arm of Nikko Cordial Corporation, one of Japan’s biggest securities companies.

The Macquarie consortium’s bid places the enterprise valuation of YBR Group at €1.825bn (US$2.3bn), which is an 11.2 times multiple of its prospective pro forma earnings before interest, depreciation, tax and amortisation for the financial year to end December 2005.

The debt portion, which is about 75% of the price and is being supplied by Merrill Lynch and Barclays Capital, could take the debt/Ebitda multiple to more than eight times, according to sources close to the deal.

Brian Berry, chief executive at Nikko Principal, and Simon Oakhill, principal at Nikko, said its consortium had fought off stiff competition from private equity firms to buy YBR as it had a “very attractive debt package”. But they admitted that because the business was stable, with fairly predictable cashflows, returns could be lower than other private equity firms’ targets. Market sources said these targets could be in the middle to high teens and said that Macquarie was strategically prepared to hold its investments longer than the three to five-year average.