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. Last Updated: 07/27/2016

Directory Publisher Sold to Macquarie

SYDNEY, Australia -- Macquarie Bank's newest investment fund will buy European directory publisher YBR Group for 1.8 billion euros ($2.3 billion), expanding an asset management business that is delivering record profit.

Macquarie Capital Alliance Group and other investors agreed to buy YBR, or Yellow Brick Road, from 3i Group and New York's Veronis Suhler Stevenson, the company said in a statement Monday. Macquarie Bank, Australia's largest securities firm, manages the fund and is its largest shareholder.

Macquarie Bank's profit more than doubled in the past four years as it increased fees from managing funds that buy assets such as airports and toll roads and lure investors with dividends. It is the world's largest non-state investor in infrastructure assets, with about 89 billion Australian dollars ($67.4 billion) under management.

"A business like Yellow Brick Road has got good and steady cash flow," said Martin Littler, who helps manage the equivalent of $15 billion of stocks at Colonial First State in Sydney.

"Macquarie is saying that it bought the business cheap and it meets its internal rate of return."

Macquarie Capital raised 1 billion Australian dollars in an IPO last month. 3i and Veronis built YBR by acquiring directory businesses from Sonera, Royal KPN, Telekom Austria and Verizon Communications. The sellers may make about four times their original investment from the sale, said people familiar with the transaction who declined to be identified.

Nikko Cordial, Japan's third-largest securities firm by sales, Caisse de Depot et Placement du Quebec, Canada's biggest pension-fund manager, and Macquarie Bank itself are part of the group that is buying the company.

Macquarie Capital will buy a 36 percent stake in the directories company for 200 million euros ($250 million). Macquarie Bank will take 18 percent, Caisse will hold 27 percent and Nikko will hold 15 percent, according to investor presentation documents. YBR's management will hold the remaining 4 percent.

"The directories market is an attractive investment sector,'' said Macquarie Capital's CEO Michael Cook, a former head of mergers at Macquarie Bank. "YBR Group has built a strong position in Europe."

Merrill Lynch and Barclays Capital will underwrite debt financing for the acquisition, totaling 1.5 billion euros.

The business, which spans eight countries including the Netherlands, Finland, Austria, Slovakia and the Czech Republic, may be eventually sold either to a buyer or in an IPO, Macquarie Capital said.

3i and Veronis paid about ?300 million ($555 million) in cash for the companies and last year reaped a 380 million euro dividend. In January, the pair hired Goldman Sachs and UBS to review options for the business, including a possible sale.

YBR has annual revenue of about 400 million euros and earnings before interest, tax, debt and amortization of about 155 million euros. 3i has a 45 percent stake in YBR; Veronis has 43 percent; and management, led by CEO Lex Cohen, owns the rest.