Montreal-based Yellow Media Inc. — the publisher of the Yellow Pages — announced Tuesday it will buy Canpages of Vancouver for $225 million.

The move by the phone directory company to acquire the local web search engine and directory publisher is an extension of its bid to grow online.

Marc Tellier, Yellow Media CEO, shows the company's new logo on March 22. Tellier says the Canpages deal will increase Yellow Media's online reach. (Ryan Remiorz/The Canadian Press)

The two companies are Canada's biggest publishers of advertising directories and local web search engines.

The deal still requires approval by the federal Competition Bureau.

Twenty-three per cent of Canpages' revenue comes from online sources.

"This really allows us to capitalize on the online momentum that Canpages has built," Tellier said in an interview. "There's clearly an opportunity to grow the online reach."

Canpages publishes 84 printed directories, operates the Canpages.ca search engine and employs about 700 people, including more than 450 sales representatives.

To acquire Canpages, Yellow Media will pay $75 million in cash and issue $150 million worth of promissory notes to an investor group led by private equity firm HM Capital Partners.

The notes can eventually be converted into shares of Yellow Media, giving the current owners of Canpages a minority stake in Canada's largest publisher of directories, including Yellow Pages and numerous related web search engines.

To sell U.S. operations

At the same time, Yellow Media announced a deal to sell its U.S. directory operations to Ziplocal. Financial details of that deal weren't released.

Yellow Pages, which had more than 4,200 employees in 2009, also owns Trader Media Corp., which operates classified advertising magazines and websites such as AutoTrader, Renters News, Resale Homes, and New Homes & Condos.

With files from The Canadian Press