Yellow Pages Group to Acquire Canpages and Contribute its U.S. Directory Operations to Ziplocal
Transactions to Accelerate Business Transformation to Digital Media
Montreal (Quebec), March 30, 2010 — Yellow Media Inc. (TSX: YLO.UN) (“YPG”) announced today that it has reached a definitive agreement to acquire Canadian Phone Directories Holdings Inc. (“Canpages”) from an investor group led by private equity firm HM Capital Partners for a purchase price consideration of approximately $225M. Canpages is a local search and directories publisher in Canada.
“The acquisition of Canpages will accelerate our business transformation to the digital world,” said Marc P. Tellier, Chief Executive Officer, Yellow Pages Group. “Canpages has built a strong local search business and we are pleased with the prospects of joining forces. It will give us the opportunity to expand our sales force, online capabilities and customer offerings.”
Headquartered in Vancouver, Canpages publishes 84 directories for a total circulation of approximately 8 million copies. The company’s website, Canpages.ca, attracts more than 3.5 million unique visitors each month. Canpages generates annualized revenues of $110M with an online contribution of approximately 23%. The Company employs about 700 people in Canada of which more than 450 are sales consultants.
“Combining with Yellow Pages Group will enable Canpages to provide a stronger digital value proposition to advertisers” said Oliver Vincent, Chief Executive Officer, Canpages. “I am confident that bringing together two experienced players in the local search industry will benefit both consumers and Canadian businesses.”
Following the close of the transaction, YPG will continue to publish the Canpages print directories in the normal course of business. Advertisers can be confident in maintaining their current advertising program with Canpages.
In addition to the Canpages acquisition, YPG announced the contribution of its U.S. directory operations, YPG Directories, LLC, publisher of Your Community Phone Book (“YCB”), to Ziplocal, LP. YCB is the publisher of independent directories in selected Mid-Atlantic and Southeast American markets and was acquired from Volt Information Sciences, Inc. in September 2008. Ziplocal is a leader in providing an innovative source of information for the businesses and communities it serves. The company operates ziplocal.com, and once the two entities merge, Ziplocal will reach over 300 markets across the United States.
“We are excited about acquiring YCB, a company that provides top-quality local search services,” added Vincent, who is currently and will remain the Chief Executive Officer of Ziplocal. “We welcome YCB’s outstanding team to the Ziplocal family and look forward to working with them to provide their customers the full breadth of local search options - print, online and mobile.”
“We want to thank the team at YCB for their commitment to delivering solid results,” added Tellier. We have found a great platform and partner for them to grow within the U.S. directory industry. The combined business will have increased scale to meaningfully invest in digital product innovation.”
Peter Brodsky, a Partner at HM Capital Partners, said: “Canpages has been a successful investment for our firm and the business is well positioned for significant future growth as part of YPG’s platform. We are excited about our new partnership in the U.S. with YPG in Ziplocal.”
YPG will continue to fully own and operate its information technology platform and centers of excellence located in Blue Bell, Pennsylvania and Indianapolis, Indiana.
The purchase price consideration of $225M for the acquisition of Canpages, subject to working capital and other adjustments, will be comprised of $75M payable in cash at closing to settle third party debt obligations and the issuance of $150M of Mandatory Exchangeable Promissory Notes (“Exchangeable Notes”) of Yellow Media Inc.
The Exchangeable Notes will rank subordinate to the senior debt of Yellow Media Inc. and bear interest at a fixed initial rate of 5%, payable quarterly in cash, subject to step up provisions over time.
Starting in the first quarter of 2011, the Exchangeable Notes will be exchangeable into common shares of Yellow Media Inc., the surviving entity following the conversion to a traditional corporate structure. Each quarter, HM Capital Partners will have the right to exchange $37.5M of the Exchangeable Notes, representing 25% of the principal amount. At any time following closing and until December 31, 2014, YPG may redeem all or a portion of the Exchangeable Notes for cash together with accrued and unpaid interest.
The Exchangeable Notes will have a final maturity of December 31, 2014. Any remaining Exchangeable Notes will be automatically exchanged into common shares of Yellow Media Inc. on December 31, 2014. The acquisition of Canpages is subject to the satisfaction of regulatory conditions to closing.
The announced contribution of YPG’s U.S. directory operations to Ziplocal will take the form of an equity-for-equity swap. YPG will own a 35% minority ownership in the new entity resulting from the business combination of YPG Directories LLC and Ziplocal, LP. This business combination will be executed under an accelerated timeline and is expected to close on or about April 15, 2010. The new entity is expected to generate approximately US$120M in revenues.
YPG and Ziplocal will explore potential long-term outsourcing agreements post-closing.
Scotia Capital and TD Securities acted as financial advisors to YPG for the proposed transaction. Signal Hill acted as advisor to Canpages and Ziplocal.
For more information on the Canpages acquisition, consult the fact sheet.
About HM Capital
Based in Dallas, HM Capital Partners LLC is a private equity firm that leverages twenty years of sector experience to acquire, change and grow strategically relevant businesses in the energy, food and media sectors. HM Capital has an outstanding track record investing in the media industry, Having completed over 100 transactions in the media space, the Firm has owned approximately 500 radio stations, 30 television stations, 600 directories and cable television systems serving more than 2.5 million subscribers. More information is available at www.hmcapital.com.
About Canpages Inc.
Canpages is a local search and directories publisher in Canada. Its website, Canpages.ca features a national residential and business database and more than 3.5 million unique visitors come to visit it every month with their local search requests. With 84 publications Canpages reaches approximately 8 million households and businesses across Canada. Headquartered in Vancouver, Canpages employs approximately 700 people and has offices in Alberta, British Columbia, Ontario and Quebec. For more information visit: www.Canpages.ca.
About Ziplocal L.P
For over three decades, Ziplocal has been a leader in providing an innovative source of information for local businesses and communities. Ziplocal reaches 167 markets and more than 8 million homes and businesses across the US. The company employs 700 people and serves more than 120,000 customers. In 2008, Ziplocal launched Ziplocal.com, its online local search portal comprised of more than 15 million unique local business listings.
About Yellow Media Inc.
Yellow Media Inc., a subsidiary of Yellow Pages Income Fund, owns Yellow Pages Group and Trader Corporation. Yellow Pages Group (YPG) is Canada’s leading performance media and marketing solutions company. The Company brings consumers and businesses together locally through its network of print, digital and mobile properties. YPG enables consumers to make smarter decisions, helping people find what they need wherever and whenever. YPG partners with businesses to build successful marketing and lead generation programs, helping them grow their business. Trader Corporation (Trader) is a leader in print and digital vertical media and offers a broad set of services such as inventory management, web solutions, optimization of media spend, and lead generation campaigns. Trader caters to the automotive, real estate and generalist verticals. Yellow Media Inc. owns and operates some of Canada’s leading properties and publications including Yellow Pages™ directories, YellowPages.ca™, Canada411.ca™, Auto Trader™(.ca), Home Trader™(.ca), and LesPAC.com. For more information, www.ypg.com.
Caution Concerning Forward-Looking Statements
This press release contains forward-looking statements about the objectives, business and affairs of Yellow Media Inc. These statements are forward-looking as they are based on our current expectations, as at March 30, 2010, about our business and the markets we operate in, and on various estimates and assumptions. Our actual results could materially differ from our expectations if known or unknown risks affect our business, or if our estimates or assumptions turn out to be inaccurate. As a result, there is no assurance that any forward-looking statements will materialize. We disclaim any intention or obligation to update any forward-looking statements, except as required by law, even if new information becomes available, as a result of future events or for any other reason.
Director - Corporate Finance and Investor Relations
Tel.: (514) 934-2828