Yellow Turns To Green For TH Lee –

The crescendo of Thomas H. Lee Partners eight years in the telephone directories space is at hand. Last week, the Boston-based private equity firm, along with minority co-investors CIVC Partners and Providence Equity Partners, agreed to sell TransWestern Publishing to Yellow Book USA Inc., the U.S. business of Londons Yell Group plc. The directories publisher is being sold to the tune of $1.575 billion in cash, with the selling party receiving approximately $900 million in net proceeds.

Based in San Diego, Calif., TransWestern publishes 332 yellow pages directories that reach 25 states. For fiscal year ended Dec. 31, 2004, TransWestern reported revenues of $358 million and EBITDA of $99.3 million, which, according to a TH Lee spokesperson, represent respective increases of 300% and 325% compared to when the firm first attained ownership of TransWestern in 1997.

In 97 [TransWestern] already had a good free cash flow model in place for a smaller company, Scott Schoen, a co-president at TH Lee, told Buyouts. What we did was help them set up a management infrastructure for a larger business and provided some funding and due diligence services for [add-on] acquisitions Its not always true that you can look back and say things had worked out just as you planned, but this one didand better.

With a reported $77 million in equity from Thomas H. Lee Equity Fund III LP, TH Lee acquired its majority stake in TransWestern through a $300 million recapitalization. In 2001, Lee, CIVC and Providence completed a $900 million leveraged recap of the company, which included the concurrent acquisition of World Pages Inc.Lees largest add-on for TransWestern. Equity for that transaction came from Thomas H. Lee Equity Fund V LP.

With plenty of stable and predictable growth still available in TransWestern, according to Schoen, favorable market conditions were key among TH Lees decision to exit the company now. There continues to be a strong financing environment, at least for assets in this sector, which afforded us the opportunity to market to financial buyers who would be willing to pay a healthy multiple, Schoen said. And with strategics in the [directories] space also doing extremely well these days, we figured it was just the right market timing.

TH Lee is obviously not the only private equity player with that view. The day before the firm announced its intentions to sell TransWestern, private equity firms Veronis Suhler Stevenson and 3i Group plc announced an agreement to sell their European directories business, YBR Group, to a consortium led by Australia-based Macquarie Capital Alliance Group for ?1.825 billion (Approx. $2.3 billion).

For Yell Group, whose U.S. products include the Yellow Book and, the TransWestern purchase will establish them as the third-largest directory publisher worldwide, John Condron, CEO of Yell Group, said in a statement. Domestically, the purchase will significantly add to Yellow Books footprint in the Northwest, West and Southwest regions, and will establish it as the fifth-largest directory publisher in the U.S., based on combined revenues of approximately $1.5 billion for fiscal year 2004/05, the statement added.