Company of the week: Reed International

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The Independent Online
SHARES in Reed International rose after newspaper speculation that Dutch rival Wolters Kluwer is discussing a $24.3bn (pounds 15.1bn) merger with the Anglo-Dutch publisher Reed Elsevier, which has failed to find a new chief executive.

The owner of Lexis-Nexis has already been subject to bid speculation during its eight-month search for a chief executive. A takeover is more likely to become reality after Reed Elsevier said on Tuesday that its leading candidate withdrew from consideration and two senior directors resigned in protest.

"This company is in desperate need of a CEO," said David Adair, an analyst at HSBC Securities. "If there is a bidder out there, shareholders may prefer to have shares in something a lot bigger that assumes the Reed business."

The publisher, which has a market value of about $20bn, has disappointed investors by generating little earnings growth on flagging sales of scientific and legal publications and increased spending on electronic publishing. Hopes that a new CEO would replace the dual-board management structure had helped shares in the two parent companies recover from losses last year.

Mark Armour, Reed Elsevier's finance director, said the failure to hire the leading candidate, whom the company didn't name, "does not involve starting from scratch" with the search. Analysts estimated the search could take until the autumn.

"It will now be at least three months or more likely more than six months before a new CEO comes on board," Mike Hilton, an analyst at Dresdner Kleinwort Benson, said yesterday. "In the meantime, in the eyes of the market, the company is effectively rudderless."

The company may even have trouble hanging on to its current co-chairmen. It may have to offer an extra incentive to Herman Bruggink to stay as he is scheduled to leave next month.