Reed Elsevier announced the acquisition of U.S. risk-management business ChoicePoint for $4.1 billion including debt alongside its results, as well as a renewed cost-savings drive and the planned sale of an advertising-dependent information business.
Shares in Anglo-Dutch publisher Reed, which have outperformed the DJ Stoxx European media sector by 5 percent over the past year, jumped 6.6 percent on the news on Thursday.
The $4.1 billion for ChoicePoint comprises $3.5 billion in cash for the 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 LexisNexis risk-information and its Analytics group would create a risk-management business with $1.5 billion in revenue and a leading position in
a fast-growing market.
The London-based company said buying ChoicePoint had the unanimous backing of the U.S. company's board and now required shareholder and regulatory approval. ChoicePoint is based in Alpharetta, Ga. and employs around 5,500 people.
Reed also announced that it would divest its Reed Business Information (RBI) arm to reduce its exposure to cyclical advertising markets. The Reed exhibitions business will be kept.
Advertising accounts for around 60 percent of revenues at RBI, which itself generates around 20 percent of Reed's 4.6 billion pound group revenues.
Numis Securities said the division could fetch around 1 billion pounds.
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 any deadline on when the RBI sale might occur given the credit-related turmoil 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 announced with what Reed described as a "more radical" move to cut costs via a restructuring plan.
This largely centres on consolidating back-office functions across the group's divisions and further centralising areas such as technology, finance, administration and procurement.
Reed, which recently returned $4 billion to shareholders after selling its education publishing assets, said it targets cost savings of 245 million pounds ($477.4 million) over 2008 to 2011 with annual savings 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 it was too early to say how many. Recent UK newspaper reports have said the company is considering 1,000 job cuts.
Reed's adjusted operating profit was 1.137 billion pounds, up 5 percent on the previous year and 11 percent higher on a constant currency basis.
Revenue at the publisher of science journals, legal information and specialty magazines was 4.584 billion pounds, compared with an average forecast of 4.606 billion pounds polled by Reuters Estimates.
Reed is raising the dividend 14 percent to 18.1 pence on adjusted earnings per share of 35.9 pence, up 12 percent on a constant currency basis.