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The BBC's Karen Hoggan
"British Telecom has been struggling under its heavy debt burden"
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Sunday, 27 May, 2001, 08:59 GMT 09:59 UK
BT sells Yell for 2.1bn
Yell web page
Yell's value was hit by the imposition of price caps
British Telecom (BT) has sold Yell for just 2.1bn pounds - barely half the value it had placed on the business just six months ago.

The sale, one of the largest private equity transactions in Britain, includes the country's leading classified advertising directory business Yellow Pages, its US counterpart the Yellow Book, 24-hour telephone-based directory Talking Pages and business information Internet site

The proceeds will go towards clearing BT's debts of about 28bn, which have savaged its share price.

British-based Apax Capital Partners and Dallas-based Hicks, Muse, Tate & Furst clinched the deal with a bid that was about 700m less than one they had previously offered.

The sale of Yell is good for BT and its shareholders

BT chairman, Sir Christopher Bland
The value of the division was hit 10 days ago by the imposition of price caps by UK fair trade watchdogs.

The move will, between 2002 and 2006, limit rises in Yellow Pages' advertising rates to six points below inflation, compared with the two points-below regime currently in operation.

The move would force Yell, which has revenues of about 500m a year, effectively to cut prices if UK inflation continues at current levels.

It could cut Yell's profits by about 10%, according to analysts.

But the new owners may ask the regulators to ease the restrictions.

Industry sources said the deal was to be announced on Friday, but had been delayed when the rival private equity partnership of Kohlberg Kravis Roberts and Texas Pacific had offered up to an extra 300m to match the Apax and Hicks bid.

British media company Carlton Communications had also made an approach to buy the business, it was reported.

Significant step

BT said the sale was a significant step in its restructuring programme.

New chairman, former BBC chief Sir Christopher Bland, said: "The sale of Yell is good for BT and its shareholders."

Yell's chief executive John Condron said he was excited about the deal, which would give it greater flexibility to capitalise on new opportunities with small and medium sized businesses.

John R Muse, from Hicks, Muse, Tate & Furst, said the purchase was part of a plan to become the global leader in the directories sector.

Executives squabble

The sale of Yell is expected to earn senior managers at its US subsidiary Yellow Book USA as much as 40m.

The payment will be derived from a $250m (275m) sweetener offered to the managers when BT acquired Yellow Book in 1999.

In the UK, where managers are expected to receive about 5m, there is much anger by bosses who feel short changed, UK press reports suggested over the weekend.

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27 May 01 | Business
BT to begin broadcasting
24 May 01 | Business
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