New York-based Veronis Suhler Stevenson and Europe’s 3i Group closed the book on their E500 million acquisition of Royal KPN’s directory publishing business, Telefoongids Media BV (TeleMedia), finalizing the deal on Feb. 13, shortly after regulators from the Netherlands green-lighted the transaction.
This is not VSS’s first foray into the yellow pages space, having first tasted success in its Yellow Book USA investment, which, with the $665 million sale to British Telecommunications in 1999, realized a 124% gross IRR. Meanwhile, 3i is no stranger to the yellow pages segment, with a profitable investment in Thomson Directories among its tombstones. The two parties also teamed up on the March 2002 acquisition of directories provider Sonera Info Communications (renamed Fonecta) in a $96 million deal.
Veronis Suhler Stevenson and 3i had been talking about teaming up on other potential offers, and when the opportunity to acquire TeleMedia surfaced, they believed a joint bid made sense given their histories, according to Marco Sodi, a principal and managing director at VSS. The buying group was not alone in its interest for the directories business, which drew a total of 32 first-round bids. Credit Suisse First Boston arranged the sale of the unit for KPN.
The buying group paid E500 million, or $502.2 million, for the TeleMedia unit. ABN Amro provided E390 million of debt, which consists of E80 million in mezzanine debt and a E310 million senior credit facility. VSS and 3i will provide the equity to cover the balance, splitting the contribution in half, while management will also take a small stake, with an equity provision as well.
Telefoongids distributes approximately 50 regional directories in the Netherlands and also provides CD-ROM and online directories products, as well. The company reported E139 million in 2001 and has a market share of roughly 41% of the Netherlands’ total yellow pages market. Going forward, Sodi expects the company to see double-digit EBITDA growth, with revenues staying steady in the single digits.
In further developing the business, VSS and 3i will look primarily to organic growth. “We think the opportunity lies in improving the business and increasing the efficiencies,” Sodi said. He did add that Telefoongids may also look at acquisitions in order to expand to other markets, noting that the Netherlands’ “central geography” in Europe would make the company a solid platform for expansion into contiguous countries. Additionally, the company will focus on improving its mobile and Internet applications.
VSS used its VS&A Communications Partners III LP for the transaction. The firm closed that fund in 1999 with just over $1 billion, and so far, has invested over 60% of the capital.(as of 2002).