Reed Elsevier continued along the restructuring path yesterday by putting its New Scientist and Farmers Weekly publishing wing up for sale as it snapped up the US risk management consultancy ChoicePoint for £2.1bn.
Over the past two years, the publishing group has been transforming itself by moving away from magazines with associated print costs and a dependence on advertising to concentrate on faster growing online and subscription businesses.
Yesterday marked the latest step in the company's evolution, after it sold off its Harcourt Education wing for £2.5bn last year.
ChoicePoint, which is based in Alpharetta, near Atlanta, Georgia, and has more than 5,000 employees, provides data and analytics to the insurance industry.
Reed said the combination of ChoicePoint with its existing LexisNexis Risk Information and Analytics Group would create a risk management business with $1.5bn (£760m) in revenues and "a leading position in this fast-growing sector".
Analysts said the publishing wing, Reed Business Information (RBI), which counts Estate Gazette and Flight International among its titles, could attract a price tag of £1bn. The Property Week owner United Business Media and private equity have both been named as potential bidders. Amanda Purton, an equity analyst at Barclays Wealth Research, said: "The announcement that Reed wants to dispose of its B2B business will be taken positively, as this reduces exposure to advertising and enables the company to become less cyclical." However, she said carrying out the disposal may be difficult in current markets. "We expect the company to be disciplined and achieve a good price rather than a speedy exit," she said.
Reed said it would cont-inue to streamline the business with savings of £245m over 2008 to 2011 – higher than analysts had expected – and targeted annual cost savings of £100m by 2011.
The raft of announcements came as the company reported a 5 per cent rise in operating profits from operations which will remain in the business – to £1.14bn. Revenues from those divisions increased 2 per cent to £4.58bn, up 6 per cent on a constant currency basis. Group-wide profits were ahead of market expectations at £998m, an increase of 8 per cent compared with the previous year.
Investors welcomed the latest developments, sending shares in the company up 7.5 per cent, or 44.5p, to 628.5p. Analysts were also positive on the group's further move away from traditional media which has been under pressure in recent years.
Keith Bowman, an equity analyst at Hargreaves Lansdown stockbrokers said: "Reed's reputation for being a defensive media stock has received a triple boost, not only do the results confirm such status, but a considerable sale and acquisition further enhance the view. A sale of the more cyclical Business Information division and acquisition of ChoicePoint moves the company further into the arena of more defensive support services. In addition, the group's continued cost-cutting and transfer of services online, provide added momentum to the story."
Reed Elsevier's chief executive officer Sir Crispin Davis said the acquisition of ChoicePoint "represents a major further step in the building of our risk management business and in the development of Reed Elsevier's online workflow solutions strategy". He added: "The market growth in risk information and analytics is highly attractive and ChoicePoint brings important assets and market positions that fit well with our existing business and, in combination, can be leveraged to very good effect."
He said the "move to a more cohesive portfolio provides us with the opportunity to accelerate progress in consolidating and stream-lining our technology, operations and back office support".
"In doing so, Reed Elsevier becomes a more integrated company with significant savings in cost structure," he added.
Reed will retain its exhibitions arm, which organises more than 500 events each year in 38 countries. The division has come under fire from peace protesters and its own publication The Lancet for dealing with arms manufacturers at arms fairs.
In February 2005, Choice-Point disclosed that thieves posing as small business customers had gained access to the company's database, possibly compromising the personal information of 163,000 people. The following year, the company agreed to pay $15m to settle Federal Trade Commission charges that the data warehouser's security and record-handling procedures violated consumers' privacy rights.Reuse content