Yellow Pages Group to Acquire Canpages and Contribute Its U.S. Directory Operations to Ziplocal
Market Wire, March, 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.
Transaction Considerations
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
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