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The Kelsey Report® Advisory

Yell, the White Hat Acquirer
Bobbi Loy-Luster,John Kelsey,Neal Polachek , 1/23/2002

Issue: McLeodUSA Publishing Bidding Won by Yell Group

News: A process that began a little over a month ago when Forstmann Little put an offer on the table to buy McLeodUSA Publishing has ended with Yell Group winning a competitive bidding process. The U.K.-based Yell will pay $600 million for McLeod, twice its estimated 2001 revenues and 10.3 times the earnings before interest, taxes, depreciation and amortization (EBITDA) estimate by Yell.

By adding McLeod's 267 directory titles in 21 states (January 2002 Rates & Data), the Yell Group will have directories in 40 states. In six states, McLeod and Yellow Book both have directories, but they overlap in only two markets. "This is a simple fit. Both the management teams and the market areas are complementary," John Condron, chief executive officer of Yell and the driving force behind the acquisition, told The Kelsey Group (TKG).

Yell's principal shareholders are funds advised by Apax Partners and Hicks, Muse, Tate & Furst. The company includes the U.K. Yellow Pages and Business Pages directories, Yellow Book directories in the U.S., Yell.com and Talking Pages. Terms of the definitive agreement are substantially the same as in the previous agreement with Forstmann Little, which had originally bid $535 million. McLeodUSA Inc. will retain its brand for a minimum of five years on directories published in the 25 states in which it operates various communications services.

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