Yellow Pages buys realty listings site
Just three years after nearly sinking under the weight of a huge debt burden, Yellow Pages Ltd. took another step on Tuesday in its transition from a legacy business built around delivering phone books to a digital-first company with the $50-million purchase of online real estate platform ComFree/DuProprio.
“We already had a lot of business around real estate because we are very strong in home renovations, plumbing, heating systems and air conditioning — everything about homes,” said Yellow Pages CEO Julien Billot in an interview. “So being in the real estate market was very natural.”
ComFree/DuProprio is the fourth-most-visited network of real estate properties in Canada and has a 17-per-cent share in Quebec’s listings market, with revenue exceeding $40 million in 2014.
Today, 55 per cent of Yellow Pages’ revenue is generated from its digital assets and Billot says that proportion will grow in the coming years.
The company says it is reviewing about 300 markets where delivery of the print directory could end for some highrise buildings, streets or neighbourhoods.
In December 2014, Yellow Pages bought the online restaurant-finding services Bookenda and Dine.TO, and has incorporated these services into its YP Dine mobile app, which is currently available in Montreal but is rolling out in other Canadian cities this month.
“What’s true is that our mission has always been the same: connecting users with businesses in neighbourhoods and we had to basically completely reinvent the way of doing that,” said Billot of the company that published its first directory in 1908.
“When you think about the Internet today, the world is actually getting more local because people want to do business with neighbourhoods.”
Just a few years ago the company had debt stacked as thick as its once ubiquitous yellow phone books and had to restructure the company to avoid bankruptcy.
The net debt at the beginning of 2012 was $1.7 billion, compared with $455 million reported in March 2015. The company repaid $35 million in May, and Billot says it intends to repay $65 million in November 2015.
Because the company cannot go deeper into debt, the ComFree/ DuProprio tuck-in acquisition will be paid for in cash.
“They have about $140 million in cash on hand and they have about $120 million of free cash flow this year, so they have the ability to do all they want, as long as it’s small and they do it for cash,” said Paul Gardner, a partner and portfolio manager at Avenue Investment Management, which was part of a bond group that restructured the company in 2012.
Avenue owns convertible debentures and says Yellow Pages is still trying to improve its capital structure by paying down its debt and driving digital growth.
“They have to get the debt eliminated effectively. It’s a company that doesn’t need debt,” he said in an interview. “Because it’s a high-free-cash-flow business, they can grow through their free cash flow yield.”
The purchase of ComFree/DuProprio will be completed July 1, and is not subject to any closing conditions.