Yell prepares London IPO

The directories company owned by private equity firms Apax and Hicks Muse is set to enter the FTSE 100 following a listing this month that will value the company’s equity at up to £2.11bn.

A year after their first attempt to float Yell Group was pulled due to adverse market conditions, venture capitalists Apax Partners and Hicks, Muse, Tate & Furst, owners of the UK directories business, have decided the time is now right to proceed with a stock market listing of the company.

 

Today the two firms published the prospectus for the proposed listing on the London Stock Exchange with an indicative price range of 250 pence to 300 pence per share, valuing the company at between £1.76bn and £2.11bn. Pricing and allocation is expected to take place on or around 9 July with conditional dealings scheduled for the following day. 

 

According to the document, Yell hopes to raise £850m, including £433m from the sale of new shares, the proceeds of which will go to Yell. A further tranche of existing shares worth £417m have been put up for sale by Apax and Hicks Muse in order to complete stage one of their exit from the business.

 

In total, the float will account for 44 per cent of the enlarged share capital of Yell, although this could reach 51 per cent if over-allotment arrangements are exercised in full.

 

Yell has performed well since Apax and Hicks Muse acquired the business from BT in June 2001.

 

From 2002 to 2003, Yell’s UK printed directories business achieved a growth rate in turnover of just over six per cent. Turnover has grown from £774m in the 2001 financial year to £1.1bn in the 2003 financial year, which the company attributes to organic growth and a number acquisitions in the US since the takeover. During the same period EBITDA has grown from £234m to £323m.

 

In the US, Yell is the largest independent directories publisher, with a 42 per cent share of the US independent directories market in 2002. Yell is the fifth-largest overall publisher of classified directories and operates in approximately 525 markets in 41 states and Washington, DC.

 

Yell currently has approximately £2.4bn consolidated net debt, including approximately £0.7bn of shareholder bonds. After exchange of these shareholder bonds into equity and the application of the net offer proceeds to pay down debt, Yell’s consolidated net debt will be approximately £1.3bn.

 

After the offering, Apax Partners and Hicks, Muse, Tate & Furst will together own approximately 50 per cent of Yell. This will drop to 44 per cent after exercise of the over-allotment arrangements.

 

Lyndon Lea, a partner at Hicks Muse, will remain on the board of Yell following the IPO as a non-executive director. Goldman Sachs Group and Merrill Lynch are coordinating the sale.

 

The deal looks set to be the first major UK listing of a private equity-backed company on the London Stock Exchange in just over a year. In June 2002, Cinven and CVC successfully listed UK bookmaker at 225 pence per share, valuing the company at just under £1bn. William Hill has since increased in value to its current level of 285 pence per share.