It has completed the competitive bidding process for the McLeodUSA Publishing Company led by Credit Suisse First Boston; and has reached a definitive agreement with United Kingdom based Yell Group, a company whose principal shareholders are funds advised by Apax Partners and Hicks, Muse, Tate & Furst, for $600 million.
Concurrently the Company has terminated its agreement with Forstmann Little & Co. to purchase McLeodUSA Publishing Company, which was announced on December 3, 2001. Forstmann Little & Co. had agreed to purchase the directory publishing business for $535 million as part of the recapitalization transaction and had agreed that McLeodUSA could seek superior competitive offers with no break-up fee.
The sale of the directory business to the Yell Group is conditioned on the consummation of the Company’s recapitalization transaction and is also subject to Hart Scott Rodino approval and other customary closing conditions. In addition, the sale and purchase price of $600 million is contingent on a closing date on or before August 1, 2002, with a reduction in price of $200,000 a day from May 1 through August 1, 2002.
Terms under the definitive agreement with the Yell Group are substantially the same as in the prior agreement with Forstmann Little & Co., including:
McLeodUSA Incorporated will retain its distinctive branding on directories published in its 25-state footprint through a 5-year Operating Agreement (with renewal options) with the Yell Group;
McLeodUSA Publishing Company will continue to have a major employment presence in Cedar Rapids, Iowa.
As a strategic buyer, the Yell Group has the opportunity to expand their presence in the U.S. with the purchase of our directory publishing business. We know they will provide a high quality directory for McLeodUSA as well as a good home for the directory publishing employees, said McLeodUSA President and Chief Executive Officer Steve Gray. We look forward to working with the publishing team as we execute on our strategy in our 25-state footprint.
John Condron, Chief Executive of Yell, said, The agreement to acquire McLeodUSA Publishing Company will be a very exciting development for Yell and signifies a major U.S. expansion, building on our already strong presence with Yellow Book – the leading U.S. independent directory publisher – which we purchased in 1999. This agreed acquisition is in line with our stated international strategy for appropriate expansion in key U.S. and European markets. It provides us with exciting new growth opportunities in the largest directory market in the world. Also I am pleased to welcome a management team with enormous experience, proven track record and customer focus culturally attuned with the Yell Group.
McLeodUSA is continuing negotiations with an ad hoc committee of the Company’s bondholders regarding the previously announced exchange offer and recapitalization transaction. Consummation of the previously announced exchange offer and the related recapitalization requires, among other matters, the agreement of at least 95% of the holders of approximately $2.9 billion of McLeodUSA senior notes to complete the transaction in an out-of-court proceeding. There can be no assurances that discussions will yield a transaction acceptable to both the committee and the Company, and any agreement, if one is reached, could result in material changes to the terms of the proposed restructuring. Additionally, there can be no assurance that McLeodUSA will be able to obtain the requisite consents from bondholders prior to the expiration of the exchange offer, as extended, or the grace periods for the failure to pay interest on its senior notes. If such requisite consents are not received by such time as set forth in the exchange offer, as extended, McLeodUSA has reserved all of its rights to pursue any and all of its strategic alternatives.
