Lots to Yell about in £750m float

YELL'S 7,500 employees stand to gain a share windfall worth at least £600 apiece when the yellow pages business is floated in London in the next month. But the awards, to everybody from the cleaners and sales people upwards, pale in comparison with chief executive John Condron's estimated £20m stake.

Some 120 senior managers also stand to gain more than the basic £600, while venture capitalists Apax Partners and Hicks, Muse, Tate & Furst, who bought Yell from BT last June for £2.1bn, could make a £600m profit. They recognised that BT, then struggling under a massive £30bn debt mountain, would be a soft touch. Only employees who were with the firm in early March are eligible.

Yell hopes to raise £750m to cut debt and give it the ability to offer shares for acquisitions in the US and Europe. The investment banks leading the float reckon Yell will have a market value of £2.4bn-£2.8bn. Only big City investors will be offered shares at perhaps 10% cheaper than that range to ensure the company makes a strong start.

Yell fell from £163m pre-tax profits to £13m losses after heavy US investment. Operating profits were £221m.

The banks' valuation is based on their belief that the Government will relax controls on Yell's advertising rates in early 2006. If that does not happen, they reckon Yell's market value could be £2.3bn.

The controls force Yell to cut its prices by 6% below the rate of inflation and are designed to prevent it from abusing its dominant position. Yell generates just over half of its £1bn sales in the UK, with the rest in the US.

Details of the offer and the indicative price are expected shortly. Yell is the fifth-biggest directory publisher in the world, with 83% of the UK market. It moved into the US with the £380m acquisition of Yellow Book USA and, soon after, bought rival McLeod for £400m.