Reed calls off pounds 18bn link-up with Wolters

Reed Elsevier, the Anglo-Dutch publishing group, yesterday shocked the stock market when it called off its proposed pounds 18bn merger with Wolters Kluwer, the Dutch group after the deal ran into opposition from European competition authorities.

In a joint statement, the two companies said that "in the last few days Wolters Kluwer has made it known to Reed Elsevier that it needed to renegotiate a number of the terms of the proposed merger". This came after Wolters Kluwer concluded that the conditions set by regulators for clearing the deal would have "adverse implications for the benefits of the merger for the respective shareholders of all three companies".

A Wolters spokeswoman said that disposals required by the regulators would have threatened the company's 15 per cent annual earnings growth target.

However, the parties said no other matters had arisen in the course of the financial due diligence between the parties that would otherwise have given cause for the merger to be cancelled.

The merger, which was announced last October, was to have created the world's largest professional and scientific publishing group, with combined profits of pounds 1.2bn on sales of pounds 5bn, and with dominant positions in medical and legal publishing.

However, it had attracted vociferous opposition from consumers, who argued that the combined company's grip on certain markets would be too strong.

In recent years Reed Elsevier, which is controlled by holding companies Reed International and Elsevier, has concentrated on building up its positions in what it calls "must-have" information - scientific, legal and professional information that consumers must have access to at all costs. The company, which is led by joint chief executives Nigel Stapleton and Herman Bruggink, has also spearheaded the move into on-line publishing.

Shares in Reed International plunged 57p to 620p on the news while Elsevier shares fell 3.10 guilders at 34.50. Shares in Wolters Kluwer closed down 3.90 guilders at 303.10. Shares in the three companies had risen by between 10 and 20 per cent since the merger was announced.

Analysts said the news was a setback for Reed, but was not fatal. "It's not the end of the world. It's more a question of lost opportunity," said Louise Barton, an analyst at Henderson Crosthwaite.

The merger was not about cost cutting - the cost savings of the deal were expected to be no more than pounds 50m. Experts had expected the deal to increase both companies' growth rates into the next century.

Reed Elsevier and Wolters had described the benefits as "synergies". Users of both companies products, however, were concerned that the merger would give them the power to increase prices in some of their markets.

The European Commission had received complaints about the potential dominance of the tax and legal publication business. Legal companies currently marketing their products through Reed's Lexis-Nexis on-line database were also worried that their products would be pushed out in favour of Wolters Kluwer's offerings.

The complaints found a sympathetic hearing with the Commission, which last December said it had "serious doubts" about the proposed deal, arguing that there were "very significant overlaps between the activities of both parties in several areas [for example, in the areas of legal and tax publishing] where the position of either one or both of the parties seems already strong at the moment."

US competition authorities were also scrutinising the merger closely.

Industry experts said yesterday the prospect of being forced to sell more business than expected may have scuppered the deal. "They've had a huge number of objections and would have had to sell a large number of the businesses," said one analyst. "There was a huge hassle factor. It takes time to do these things."

Analysts said Reed was now likely to concentrate on building up its business through a series of smaller acquisitions. The company, which has brought forward the reporting of its full-year 1997 results to Thursday, has a strong balance sheet following the January sale of IPC, its consumer magazine business, to a management buyout team for pounds 950m.

Outlook, page 19

Start your day with The Independent, sign up for daily news emails
election 2015The 10 best quotes of the campaign
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'