Yell ponders £1.4bn bid for Dutch firm's directories business

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The Independent Online

Yell, the UK-quoted directories group, is consideringa bid for the directories business of the Dutch media firm VNU, which was put up for sale yesterday.

Yell, the UK-quoted directories group, is consideringa bid for the directories business of the Dutch media firm VNU, which was put up for sale yesterday.

Reporting its full-year results, Yell said that while its priority was still to make smaller acquisitions in the US, it would not rule out a larger acquisition in Europe when the opportunity arose.

John Davis, the chief financial officer, said he would consider a bid only if the company met three strict criteria. "Firstly, it would have to have good local management. Secondly, we would have to be sure we can bring something to it - we don't just want to buy the existing management's business plan - and thirdly, we would have to be sure its appropriately valued."

He added that Yell has walked away from large acquisitions in Europe before and would do the same if VNU's business did not meet its criteria. Analysts estimate that VNU's directories business would fetch at least €2bn (£1.35bn). A source close to Yell said financing a €2bn acquisition would not present a problem.

Regardless of any European acquisition, Mr Davis said Yell planned to use about two-thirds of its projected £200m free cash flow for US acquisitions over the coming year, with the remainder used to finance a final dividend payment of 6p a share.

News of a possible acquisition overshadowed strong results from Yell yesterday, with post-tax adjusted profits at £60.2m - up from a £25.5m loss the previous year. Costs resulting from the company's flotation, as well as a one-off restructuring charge, dragged the group down to an overall loss of £51.1m, however. Group turnover rose 6.5 per cent to £1.19bn, with turnover in the UK and US rising 3.3 and 10.6 per cent respectively.

Yell is the biggest independent directories group in the US, with an 8 per cent share of the market. In the UK, it is by far the largest. Its shares rose more than 5 per cent yesterday to 318.75p, valuing it at £2.2bn.

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