APAX PARTNERS and Hicks, Muse, Tate & Furst, the private equity funds, sold their remaining stake in Yell, the Yellow Pages directories group, last night, more than doubling their investment injust over two years.
A rapid 90-minute share placing by brokers at Goldman Sachs and Merrill Lynch resulted in the pair’s 34 per cent stake being sold for about pounds 700m. The placing price is understood to have been close to yesterday’s closing market price of 307.5p, with market rumours suggesting it was about 303p.
Apax and Hicks, Muse floated Yell in July, raising an initial pounds 793m. Their decision to sell their remaining 34 per cent stake means they will have made two and a half times their original investment in the business. Yell, whose chief executive is John Condron, cost pounds 2.1bn in 2001 when it was bought from BT Group, although Apax and Hicks, Muse only invested pounds 600m of equity; the rest of the deal was funded by debt.
Under the terms of the July flotation, the two investment houses could not sell their remaining stake until 11 January. However, with the permission of the two investment banks leading the float, they could sell earlier if the brokers felt the City would accept such as sale.
In the event, after opening the sale process at 4.30pm yesterday afternoon, the brokers closed the books at 6pm, having seen the issue oversubscribed by institutions keen to invest more in the operation.
By announcing plans for a share sale before 11 January, Merrill Lynch and Goldman Sachs hoped to avoid the usual problem with such lock-up agreements.
Companies often see their share prices fall as the end of a lock- up agreement looms, in anticipation of a big investor selling its shares. As the date approaches hedge funds in particular start selling shares in speculative trades, hoping to buy them back more cheaply at a later date.
It would seem that by opening and closing the placing so quickly, Goldman Sachs and Merrill Lynch have managed to avoid the usual short selling that goes on in these events.
Sources said last night that the deal was oversubscribed and that allocations would be going out overnight.
Yell shares have been rising recently, suggesting the City had no whiff of the transaction to come. Although it will have been taken by surprise by last night’s rapid events, it is thought unlikely that the Yell shares will suffer any negative effects from the transaction.
The two private equity groups are selling their stakes as a precursor to raising new funds for further investments. Hicks, Muse is the Texan investment group that recently paid more than pounds 600m for Weetabix. It is now preparing to raise a new fund aimed at European takeovers, which it hopes will top EUR1bn.
“We are not by nature holders of public company stock,” Stephen Grabiner of Apax told Bloomberg News yesterday. “We are private investors.”
