France Telecom on Wednesday finally bowed to market pressure and decided to put its majority stake in directories business PagesJaunes up for sale.
The group said it would look at selling all or part of its 54 per cent stake in the business, which operates mainly in France and Spain, as well as Belgium and Luxembourg.
PagesJaunes, which was floated at a market capitalisation of €4bn ($5.1bn) in 2004, was on Wednesday valued at about €6.4bn. Any bidder who acquired more than 30 per cent of the directories group would be forced to launch a bid for the whole company.
The size of the deal is unlikely to be an obstacle, however: debt markets have proved to be enthusiastic supporters of deals in the sector.
Private equity groups and trade buyers are expected to look closely at the latest big directories sell-off, with the sector attracting significant interest in recent years because of its highly cash- generative nature.
Last month Yell, the British directories business, won a fierce bid battle for TPI of Spain against a raft of private equity players to pay a price perceived to be on the high side of €2.3bn.
Speculation focused on interest from funds such as Apax, Carlyle CVC and Permira. However, the sale could even attract investors better known for infrastructure deals, such as Macquarie Bank, which recently bought Yellow Brick Road, the pan-European directories business.
The decision to sell the directories business comes as France Telecom builds investment in advanced technology to bring together internet, fixed and mobile communications and television services. The group intends to focus on a range of high value added products at the cutting edge of technology to offset the decline in its traditional fixed-line business.
Analysts welcomed the sale as a sensible step, which would give the French utility significant resources to cut debt and increase investment.
It was also welcomed for PagesJaunes, which has been hampered in its ability to make significant acquistions under France Telecom’s ownership.