KKR to exit Canada’s Yellow Pages for C$743m

Canada’s largest directories publisher has announced it will buy out Kohlberg Kravis & Roberts’ 19.4 percent stake, netting the New York firm three times return on investment.

New York buyout firm Kohlberg Kravis & Roberts (KKR) has agreed to sell its remaining 19.4 percent share in Canada’s Yellow Pages Group for C$743.3 million (€447 million, $546 million).

Factoring in KKR’s C$804.4 million sale last December of the majority of its initial shares in the company, the firm will collect about C$1.6 billion total, tripling its C$545 million investment in 2002.

Yellow Pages Income Fund, a Canadian income trust that holds approximately 70 percent of Montreal-based Yellow Pages Group, Canada’s largest telephone directories company, announced the issue of about 66.7 million trust units to fund the purchase of KKR’s interest in the publishing subsidiary.

In late 2002, KKR and the private equity arm of the Ontario Teacher’s Pension Plan Board acquired 90 percent of Yellow Pages Group for C$3 billion from Bell Canada. At the time, KKR put down about C$545 million in equity toward the deal, giving it a 60 percent stake in the company. Yellow Pages became an income trust, a tax-free entity that distributes most of its cash to unit holders, last August in a C$1 billion initial public offering, but KKR waited until later that year to sell off most of its interest.

KKR, known in the industry for its mega-buyouts, in April agreed to buy satellite operator PanAmSat from DirectTV Group in a deal worth $3.55 billion (€2.98 billion). The proposed deal is 2004’s largest to date in the US private equity market. With approximately $750 million in assumed debt, the deal’s total value is $4.3 billion.