Reed Elsevier is Selling Reed Business Information, Buying Choice Point

By: Mitra Hooman (2/21/2008)

Reed Elsevier has decided it doesn’t like the exposure it has to advertising markets and cyclicality.  So, it is selling off its magazine publishing operation, Reed Business Information.  RBI puts out, among others, Variety and Daily Variety, Broadcasting and Cable, Multichannel News, Publishers Weekly and New Scientist.  Meanwhile, it is also going to spend $4.1 billion in cash to buy data and analytics firm ChoicePoint Inc., paying 14 times earnings.

 Reed Elsevier chief exec Crispin Davis said that the Anglo-Dutch company was dumping RBI to pay more attention to its core business, which he defined as “subscription-based information and workflow solutions.”  He added that buying ChoicePoint, “represents a major further step in the building of Reed Elsevier's risk-management business and in the development of our online workflow-solutions strategy.” 

RBI should find a buyer.  As Davis said, “RBI is a well-managed high-quality business as evidenced by the success of its online growth and the control of costs.”  In 2007, it had revenues of £906 million (US$1.76 billion give or take a few million), and its adjusted operating profit came in at $233 million.  However, with 60% of that revenue coming from advertising and another 30% from online operations, it doesn’t fit with Reed Elsevier’s new focus.

ChoicePoint was spun off Equifax, the credit bureau, back in 1997 and it provides data and analytics to the insurance industry.  Its revenues have grown to $1 billion in its decade-long existence apart from Equifax, having started with $400 million.  However, in 2005, it had a pretty bad security breach that led to one of the biggest identity-theft panics ever.  Last year, it settled with 43 states and agreed to spend $500,000 to educate consumers on ID theft.  Analysts say that this weighed on the stock, and that encouraged management to accept Reed Elsevier’s offer.

 Reed Elsevier plans on combining Choice Point with its Lexis Nexis data service to establish a new risk analytics operation.

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