Yellow Pages sale plans fall through

Yellow Pages headquarters in Greenlane. Photo / Paul Estcourt

The Yellow Pages Group is off the block for now but one analyst says he would be surprised if the company's bankers didn't try to sell it again.

The debt-laden company, bought by Hong Kong-based Unitas Capital and Canada's Ontario Teachers' Pension Plan for $2.24 billion in March 2007 in the country's largest-ever leveraged buyout, yesterday said it had called off the sales process because value expectations were unlikely to be met in the current market.

"Whilst there were a range of interested parties, the Yellow Pages Group shareholders, in conjunction with the banking syndicate, have come to the view that they won't be pursued any further at this time," the company said in a statement.

"The current economic climate is not well suited to large-scale merger and acquisition activity and that, as a result, the expectations of the stakeholders in regard to value are unlikely to be met in the current market."

Investment bank Goldman Sachs has spent the last few months marketing the group to potential buyers. The tender closed in late August.

Only foreign buyers were thought to have been potential bidders for the company, which has $1.7 billion of debt with 28 bankers and debt holders. But bidders are thought to have been put off by deterioration in the business' revenue and staff turnover.

Last month Yellow Pages' chief financial officer left the firm.

Market commentators had put the value of the company at between $900 million and $1.05 billion, but speculation yesterday put the offers as low as $450 million to $600 million.

Neither Yellow Pages chief executive Bruce Cotterill nor the banks were available for further comment but in the statement the banking syndicate said it would now look to complete already advanced plans to restructure the debt.

A spokesman for Yellow Pages said the banks remained in a meeting yesterday and the company was hoping to have a restructuring plan in place by Christmas.

"It's up to the banks and the owners how they do that but because the debt is spread across so many players it will take time."

The bankers said they intended to take a long-term view as owners of the business.

Mark Clare, a partner at boutique investment bank Woodward Partners, who has closely followed the business, said he was not surprised by the collapse of the negotiations.

"The actual haircut would have got to a stage where it was too much for the banks to take."

He said he would be shocked if the banks did not try and put the company on the market again.

"I would expect them to prop it up for a period of time and try and sell it down the track."

Clare said it was impossible to know how long it could take for the market to pick up again.

Another source said the situation could lead to a change in management and strategy at the company, but a Yellow Pages spokesman said no staff changes were expected.

In the statement, Cotterill said it was good to have some clarity after the uncertainty associated with the sale process.

"The banking syndicate has been working hard to achieve an outcome that will take Yellow into the future. We look forward to working with them to finalise the debt restructure and move forward."

He said the company was working on some positive initiatives to ensure its success in the next few years.

Yellow Pages is expected to report its end of year financial results in the next few weeks.