After three months of negotiations, and a final round of bidding comprising more than a dozen of the world’s largest private equity firms, a consortium of four European houses has won the race to acquire a 61 per cent stake in Seat Pagine Gialle, the Italian yellow pages business owned by Telecom Italia in a deal worth just over E3bn.
BC Partners, CVC Capital Partners, Investitori Associati and Permira joined forces as equal partners to acquire a majority interest in the business, which Telecom Italia decided to sell to reduce its debt, which currently stands at around E42bn.
The deal will see the consortium pay E3.03bn for its stake in the business, which is taking on E708m of debt. The consortium will then offer E0.598 per share for the remaining equity in Seat, currently listed on the Milan bourse, which will give the deal a total value of E5.65bn, making it Europe’s largest ever buyout.
Last year Seat Pagine Gialle reported turnover of E1.99bn and EBIT of E232m. The transaction will allow Telecom Italia to reduce its net financial debt by approximately E3.74bn, in line with the group’s stated objective.
The successful consortium beat off competition from many of the world’s largest private equity players, including bids from Carlyle Group, Providence Equity Partners and Thomas H. Lee, UK-based Apax Partners bidding alongside Hicks, Muse, Tate & Furst, and an offer from US firms Kohlberg Kravis Roberts,Texas Pacific Group and Blackstone Group.
Guy Davies, a London-based partner at Permira who worked on the transaction financing, said the firm was “delighted” to have completed the deal. “The consortium brought together the leading private equity players in the Italian market with years of private equity investment experience in the country. The financing for the deal has been put in place and we hope to complete the transaction at the end of July, prior to launching a tender offer for the remaining shares.”
Despite the success, industry observers have suggested that the consortium has paid a very full price for the business, which was the subject of intense competition. One source said that the price was necessary to persuade remaining shareholders in Seat to offload their interest in the business.
In 1997, Bain was a lead investor in Seat Paine Gialle in a consortium that included Telecom Italia, Banca Commerciale Italiana, BC Partners, CVC Capital Partners, ABN Amro Ventures and other institutions, which took the yellow pages publisher private.
Following the disposal of the directories business, Telecom Italia will retain Seat's internet and television units as part of a newly-formed company, Telecom Italia Media. It is also expected that the consortium will dispose of some parts of the Seat business, including the Thomson Directories business acquired by Seat in August 2000.
The consortium received financial advice from Credit Suisse First Boston. The debt financing of the transaction was arranged by BNP Paribas, Barclays, Credit Suisse First Boston and Royal Bank of Scotland. Telecom Italia was advised by Citigroup and Lazard as financial advisors and Gianni Origoni Grippo as legal counsel.