Tom Lee in $1.6bn directories exit

Thomas H. Lee and CIVC will reap a huge profit in the sale of TransWestern Publishing, a US yellow pages publisher, to London’s Yell Group.

Boston buyout firm Thomas H. Lee Partners, along with Chicago’s CIVC Partners and company management, have agreed to sell US yellow pages publisher TransWestern Publishing to London-based Yell Group for $1.575 billion (€1.25 billion) in cash.

Sellers will receive approximately $900 million (€712 million) in net proceeds, according to a press statement.

Upon closing of the deal, TransWestern will merge with Yell’s US subsidiary, Yellow Book USA, to become the fifth largest directories publisher in the country with a reported $1.5 billion (€1.2 billion) in revenues. TransWestern, based in California, publishes 332 directories in 25 states and also offers online yellow pages advertising services.

TH Lee has been the majority investor in TransWestern since it made an initial investment of $77 million from its third fund in the fall of 1997, as part of a $300 million recapitalisation, according to managing director Chuck Brizius.

In June 2001, TH Lee decided to shift TransWestern to its Fund V through another recapitalisation with an enterprise value of $900 million. Sellers received distributions from TransWestern totaling approximately $350 million on their reported $400 million 2001 equity investment.

According to Brizius, TH Lee at the time invested $250 million from its fifth fund in order to simultaneously fund the purchase of directories publisher WorldPages.

The TransWestern directories deal happens amidst a flurry of private equity activity in the yellow pages sector. Just yesterday, a private equity consortium led by Macquarie Capital acquired pan-European directories group Yellow Brick Road for €1.8 billion ($2.3 billion) in cash, delivering a 110% IRR for owners 3i and Veronis Suhler Stevenson.

In March, after only four months since acquiring the Canadian directories business of Verizon for $1.5 billion, Boston’s Bain Capital agreed to sell the company to former KKR portfolio company the Yellow Pages Group for approximately $2.1 billion.