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Yell forges ahead with float
Yellow Pages owner Yell yesterday announced a £2.1bn flotation exactly one year after it shelved its last plan to go public. The deal will make millionaires of the company's senior management but cost a staggering £100m in advisers' fees and other expenses.
Yell was forced to drop its flotation plans last July as the world's stock markets went into decline after an accounting scandal erupted at telecoms group WorldCom. In an echo of last summer's volatile market, the FTSE 100 index lost some of its recent gains to close below 4,000 points yesterday - 600 points lower than it stood a year ago.
Yell's management believe they are in a stronger position than last year. The firm, which BT sold to venture capital buyers in June 2001, has successfully integrated an acquisition in the US and continued to grow in Britain despite tough regulation.
The business is also generating more than £200m of cash and yesterday pledged to add an additional sweetener to the offer - an interim dividend of 3p a share in December.
The indicative price range of 250p-300p per share values the company at £1.8bn to £2.1bn - slightly lower than last year's price range. Last night City bookmakers were expecting the shares to start trading at the top-end of that range.
The flotation will be the largest seen in London since Friends Provident went public in July 2001. It will see Yell sell shares worth a total of £850m but the exercise will cost the classified directories operation more than 10% of that figure.
Alongside £30m which will be shared between financial advisers Merrill Lynch and Goldman Sachs and a handful of lawyers and accountants, the company is spending £40m refinancing some of its existing debts and putting in place a new bank facility.
Yell's venture capital backers Apax Partners and Hicks, Muse, Tate & Furst are also demanding the payment of £28m in management fees which have accrued since they acquired the business two years ago. The two firms, which bought the business for £2.1bn and have since invested about £600m, will make £417m on the flotation with a possible further £150m if all the shares being offered are taken up by institutional investors. They will retain about 45% of the business.
The company is raising £433m through the sale of new shares which will be spent reducing the group's borrowings. Yell has debts of £2.4bn but after switching some bonds into stock and paying down and refinancing other debt that figure will reduce to about £1.3bn. Small acquisitions are also being considered.
Chief executive John Condron will reap about £5.5m through the sale of shares. His remaining stake in the business will be worth more than £15m.
Finance director John Davis will make £2.5m with the rest of his stake valued at roughly £8m.
The shares will be priced and allocated on July 9 with trading in the stock commencing the following day.