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Valuing a Cross-Border LBO: Bidding on the Yell Group

Harvard Business School Case 204-033


Course Software 205-701
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Exhibit 4 British Telecom Selected Historical Financial Information, 19962000 (pounds in millions, except per-share data)

1997

Income Statement
Total turnover
Total operating profit (loss)
Profit on sale of fixed assets
Net interest payable
Profit (loss) before taxation
Profit (loss) after taxation
Minority interests
Profit (loss) for the financial year
Basic earnings (loss) per share

Years Ended 31 March


1998
1999
2000

2001

17379
3429
8
-174
3203
2101
-24
2077
32.8p

17411
3461
63
-310
3214
1727
-25
1702
26.6p

18223
3474
1107
-286
4295
3002
-19
2983
46.3p

21903
3198
126
-382
2942
2045
10
2055
31.7p

29666
-336
619
-1314
-1031
-1683
-127
-1810
(27.7)p

6185
7
-220

6071
5
-160

6035
2
-328

5849
5
-163

5887
10
-727

Cash Flow Statement

Cash flow from operating activities


Dividends from associates and JVs
Investment Return & Finance Servicing

-1,045

-1,886

-630

-1,311

Capital expenditure and investment


Acquisitions and disposals
Equity dividends paid

Taxation paid

-2820
-252
-1217

-3108
-1501
-3473

1
-1967
-1186

-3752
-6405
-1364

-8442
-13754
-1432

Financing
Incr. (decr.) in cash for the year
Decr. (incr.) in net debt for the year

-224
-90
849

1794
-11
-3860

-458
67
3146

5959
54
-6582

19735
128
-18942

17252
1708
-2637
-3889
-1426
-223
10785
23285

742
17854
1832
-495
-3386
-1391
-216
14940
27962

5777
18163
5878
-7115
-5354
-1056
-498
15795
37588

18380
21625
5204
-11143
-18775
-723
-499
14069
54799

Management of liquid resources

Balance Sheet
Intangible fixed assets
Tangible fixed assets
Fixed asset investments
Net current assets (liabilities)
LT loans and other borrowings
Provisions for liabilities & charges
Minority interests
Total equity shareholders funds
Total assets
Source: British Telecom.

-504

N/A

2,247

N/A
16802
1273
-2667
-2693
-1391
-208
11116
25062

-2,447

1,236

-669

-480

ns, except per-share data)

Exhibit 6 BT Yellow PagesHistorical Financial Information and Management Projections for the Business, 19992005 (pound

Year
Advertisement Volume (000)
Weighted Average Advertisement Price ()
Discounts and free ads (000)
Direct costs (000)
Overhead costs (000)a
Change in WC (000)
Capex (000)
Depreciation (000)
Other U.K. businesses:
Capital cash flows after taxes (000)

Actual
Actual
Projected Projected Projected
31-Mar-00 31-Mar-01 31-Mar-02 31-Mar-03 31-Mar-04
813
853
927
991
1,058
641
645
644
648
649
42,402
47,276
78,180
86,585
84,324
180,479
187,395
195,972
201,742
206,649
102,530
88,870
74,930
77,137
79,013
10,570
12,772
2,178
6,000
8,497
7,380
9,760
10,220
9,730
9,230
5,530
5,370
6,130
8,850
8,400
-4,566

-14,438

-12,641

-8,238

1,362

Source: Apax Partners; casewriter estimates; figures have been disguised.


a

Does not include depreciation.

Starting in 2006, cash flows from Other U.K. Businesses should grow dramatically into the tens of millions of pounds. Management, however, found it difficu
the cash stream post-2005 given the high uncertainty surrounding those future projections.

s for the Business, 19992005 (pounds in thousands)


Projected Projected Projected
31-Mar-05 31-Mar-06 31-Mar-07
1,126
1,194
1,254
649
649
649
86,615
85,366
86,049
211,278
214,996
216,716
80,783
82,204
82,862
6,300
4,375
2,023
8,380
8,000
8,000
7,630
8,000
8,000
1,956

10,000 b

20,000 b

unds. Management, however, found it difficult to evaluate

Exhibit 7 Yellow Book USAHistorical Financial Information and Management Projections for the Business, 19992005 (d

Year
New launches (number)
Total Revenues ($000)
Capex ($000)
Depreciation

Actual
31-Mar-00
n/a

Actual
31-Mar-01
n/a

217,500
3,698
N/A

330,000
7,000
7,000

Source: Apax Partners; casewriter estimates; figures have been disguised.

Projected
31-Mar-02

421,600
10,600
6,240

Projected
31-Mar-03

483,200
8,700
7,910

Projected
31-Mar-04

544,050
8,170
7,430

or the Business, 19992005 (dollar figures in thousands)


Projected
31-Mar-05

598,600
8,990
8,810

Projected
31-Mar-06

688,390
8,000
8,000

Projected
31-Mar-07

757,229
8,000
8,000

Exhibit 10 Data for Comparable Listed Companies (five-year average unless otherwise indicated)
Company

Main Business Activities

Local index

SBC Communications

Long distance service, local service, wireless, and


directory publishing

S&P 500

Verizon

Long distance service, local service, wireless, and


directory publishing

S&P 500

BellSouth

Long distance service, local service, wireless, and


directory publishing

S&P 500

Qwest

DSL services, broadband and wireless


communications, directory publishing

S&P 500

Sprint

Long distance service, local service, product


distribution, and directory publishing

S&P 500

McLeodUSA

Internet access, system integration services, and


yellow pages publishing

S&P 500

WorldPagesa

Independent directory publisher recently


diversifying in Internet portal services

S&P 500

SEAT Pagine Gialle

White and yellow pages telephone directories.


More recently Internet access services

Wanadoob

Internet Service Provider. Also offers client


portals, emerchant services, and directories

CAC 40 (France)

Telefonica Publicidad e Informacionc

Directory publishing

IBEX 35 (Spain)

Enirob

Catalog and telephone directory publishing

OMX (Sweden)

Source: Bloomberg International.


aThree-year data available.
bOne-year data available.
cTwo-year data available.

MIB 30 (Italy)

Beta vs. Local


Index

Beta vs. S&P 500


Index

Beta vs. MSCI


World Index

Debt / EV

0.54

0.54

0.63

15.4%

0.53

0.53

0.61

22.6%

0.41

0.41

0.42

17.5%

1.23

1.23

1.39

25.0%

0.66

0.66

0.68

16.4%

1.75

1.75

N/A

20.7%

0.89

0.89

1.08

24.4%

0.97

0.56

0.87

2.8%

1.46

1.19

1.47

1.1%

2.33

1.13

1.9

1.9%

0.43

0.67

0.79

8.2%

Exhibit 11 Country-specific Information about Interest Rates, Currency, and Taxes


On April 12, 2001
Yield on 5-year T-bill
Yield on 10-year T-bill
Yield on 30-year T-bill
$/ spot rate
$/ 1-year forward mid rate
$/ 2-year forward mid rate
$/ 3-year forward mid rate
$/ 4-year forward mid rate
$/ 5-year forward mid rate
Tax rate

United States
4.77%
5.17%
5.61%
1.439 bid1.44 ask
1.4315
1.4290
1.4270
1.4245
1.4570
35%

Source: Adapted from Bloomberg International; Offering Memorandum, Yell Finance B.V., August 6, 2001.

ency, and Taxes

ce B.V., August 6, 2001.

United Kingdom
5.06%
4.94%
4.52%

30%