3i makes 4x on €1.8bn directories sale

A private equity consortium led by Macquarie Capital has acquired pan-European directories group Yellow Brick Road, delivering a 110% IRR for owners 3i and Veronis Suhler Stevenson.

The owners of Yellow Brick Road (YBR), the consolidated European directories group have agreed to sell the business to a consortium led by Macquarie Capital Alliance Group for €1.825 billion ($2.3 billion) in cash.

There was an element of opportunism in terms of timing – it was a very attractive, all-cash offer that led to a straightforward deal.

Jonathan Russell, head of buyouts, 3i

London-listed 3i and media merchant bank Veronis Suhler Stevenson (VSS) created YBR in April 2004 through the three-way merger of directories companies Fonecta, Telefoongids and Mediatel.

3i, which invested from its third buyout fund, realised a 110 percent IRR on the transaction and made a return of 4.2x its total €140m investment. A refinancing in 2004 returned €224 million to 3i funds. VSS invested from VS&A Communications Partners III LP.

3i had been reported to be considering a possible IPO of the business, but in an interview with PEO, Jonathan Russell, 3i’s head of buyouts said: “There was an element of opportunism in terms of timing – it was a very attractive, all-cash offer that led to a straightforward deal.”

The acquiring consortium comprised Australian-based Macquarie Capital Alliance Group, Macquarie Bank, Canadian-headquartered Caisse de dépôt et placement

Jonathan Russell, head of buyouts, 3i

du Québec and Nikko Principal Investments, the European principal finance arm of Japanese securities company Nikko Cordial. The transaction represents Nikko Principal’s first investment in continental Europe.

Commenting on the transaction, YBR chairman Gary List said in a statement: “I can’t think of anyone [other than 3i] who could have had the market access to make the original investment in [the three companies] and then the ability to put them together so successfully.”

3i and VSS first acquired Finnish telephone directories business Fonecta in 2002 and acquired Netherlands-based De Telefoongids from KPN in 2003. In April 2004, Mediatel was added to the group and the three companies were merged to form YBR.

Last week 3i announced its annual results including a 15.9 percent return on shareholder funds totalling £512 million and an intention to hand back £500 million to shareholders.