Yell books in for £3.5bn float

TWO venture capitalist firms will pocket a massive £700m profit on the Yellow Pages directory business they bought from BT 12 months ago. Apax Partners and Hicks Muse Tate & Furst will float Yell in the summer in a move expected to value it at around £3.5bn, making it by far the biggest new listing this year.

Since they paid BT £2bn last June, Yell has expanded aggressively. It spent £410m on McLeodUSA, a similar business in the US. Yell is expected to be valued at around £2.75bn and the US arm is likely to be worth around £750m. A final decision has to be made, but details could be announced as early as June.

The deal represents a major coup for Apax partner Stephen Grabiner, former-boss of the predecessor to the now-defunct ITV Digital. Grabiner and Hicks Muse partner John Muse recognised BT, then struggling under a massive debt mountain, would be a soft touch. They also anticipated that a review of price controls on Yell's advertising rates would not hurt as much as expected.

The venture capitalists have also benefited from the rerating of directories businesses. Yell annual sales run at around £1bn and it makes an underlying profit of some £270m.

The Yell deal is the latest in a number in which Apax has been involved. Grabiner's older brother, Mike, is leading the firm's bid to buy the UK arm of Energis, worth some £700m. Apax is bidding with Carlyle group against a consortium led by former Asda boss Archie Norman and backed by venture capitalist Permira. Credit Suisse First Boston is also keen to get involved and may team up with one of the venture capitalists.

Mike Grabiner, who stepped down as chief executive of Energis just months before its financial woes appeared, is also rumoured to be harbouring ambitions to link Energis with troubled US rival Global Crossing. Energis put itself up for sale in January when it warned that it would breach loan agreements it negotiated a few months earlier.