Apax, Hicks Muse prepare Yell floatation

Apax Partners and Hicks, Muse, Tate & Furst have hired three lead managers for the floatation of Yell, the telephone directories business acquired from British Telecom 2001.

Merrill Lynch will lead-manage the initial public offering of Yell, along with Goldman Sachs and JP Morgan. It is estimated that Yell will have a market capitalisation of over £3bn, allowing the financial investors to lock in a considerable profit on the £2.1bn paid for the company less than a year ago.

The Financial Times reports that the decision to float the company so soon after it was acquired is the result of the recent introduction of much tougher price controls by the UK’s Office of Fair Trading, which could erode margins on Yell's UK business from current levels of 42 per cent down to 35 per cent. Such measures would bring Yell’s margins into line with those generated in the US.

Apax and Hicks Muse financed the Yell buyout using £950m of bank loans, £500m in high-yield debt and £549m in equity. A flotation of Yell will only proceed in favourable conditions and is subject to approval by the US courts of the £430m acquisition of McLeod USA Publishing.