Reed to Buy ChoicePoint, Sell Info Division

LONDON (Reuters) – Reed Elsevier announced the acquisition of U.S.risk-management business ChoicePoint Inc for $4.1 billion includingdebt alongside its results, as well as a renewed cost-savings drive andthe planned sale of an advertising-dependent information business.

Shares in Anglo-Dutch publisher Reed, which have outperformed the DJStoxx European media sector by 5 percent over the past year, jumped 6percent to 619 pence on the news on Thursday.

The $4.1 billion for ChoicePoint comprises $3.5 billion in cash forthe equity, at $50 per share, and 600 million pounds in debt.CheckPoint shares closed at $33.66 on Wednesday.

Reed said that combining ChoicePoint with its LexisNexisrisk-information and its Analytics group would create a risk-managementbusiness with $1.5 billion in revenue and a leading position in afast-growing market.

The London-based company said buying ChoicePoint had the unanimousbacking of the U.S. company’s board and now required shareholder andregulatory approval. ChoicePoint is based in Alpharetta, Ga. andemploys around 5,500 people.

Reed also announced that it would divest its Reed BusinessInformation (RBI) arm to reduce its exposure to cyclical advertisingmarkets. The Reed exhibitions business will be kept.

Advertising accounts for around 60 percent of revenues at RBI, whichitself generates around 20 percent of Reed’s 4.6 billion pound grouprevenues.

Numis Securities said the division could fetch around 1 billion pounds.

SAVINGS

Numis said the ChoicePoint buy — at 4.2 times revenues and 14 times underlying earnings — was a "full price".

However, the broker said Reed could cover the cost of its capital via the cost-savings it expects to generate over three years.

Reed Chief Executive Crispin Davis said he was wary of imposing anydeadline on when the RBI sale might occur given the credit-relatedturmoil in global financial markets.

He said the he expects strong interest from strategic and private equity buyers.

The ChoicePoint acquisition and planned RBI disposal were announcedwith what Reed described as a "more radical" move to cut costs via arestructuring plan.

This largely centers on consolidating back-office functions acrossthe group’s divisions and further centralizing areas such astechnology, finance, administration and procurement.

Reed, which recently returned $4 billion to shareholders afterselling its education publishing assets, said it targets cost savingsof 245 million pounds ($477.4 million) over 2008 to 2011 with annualsavings of 100 million pounds by 2011.

The restructuring would incur costs of around 140 million pounds.

Davis said there would be job cuts over the next three years, but itwas too early to say how many. Recent UK newspaper reports have saidthe company is considering 1,000 job cuts.

Reed’s adjusted operating profit was 1.137 billion pounds, up 5percent on the previous year and 11 percent higher on a constantcurrency basis.

Revenue at the publisher of science journals, legal information andspecialty magazines was 4.584 billion pounds, compared with an averageforecast of 4.606 billion pounds polled by Reuters Estimates.

Reed is raising the dividend 14 percent to 18.1 pence on adjustedearnings per share of 35.9 pence, up 12 percent on a constant currencybasis.

(Editing by Quentin Bryar)

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