Reed nets US publisher for pounds 268m

Reed Elsevier, the publisher and information provider, yesterday made its second big US purchase this year, and promised to tie up further deals of a similar size before the end of the year.

Reed is paying $447m (pounds 268m) in cash for Chilton Business Group, a business publisher currently owned by ABC, a subsidiary of the Walt Disney Company. But the company said it could afford another two acquisitions of a similar size before the year was out.

Reed secured the Chilton business after an auction which is thought to have included VNU Business Publications and United News & Media's Miller Freeman subsidiary.

Chilton, based in Pennsylvania, consists primarily of 39 business-to- business titles, which will be merged into Reed's Cahners Publishing Company to form Reed Elsevier Business Information. Chilton Research Services, a business research company, will also form part of this new division. Chilton's exhibitions business will be absorbed into Reed Exhibition Companies.

Reed told analysts it was aiming to chop around $10m in costs from the Chilton group within about a year. Mark Armour, Reed's chief financial officer, said the company would be identifying "considerable operational synergies" in the paper, distribution, circulation and services departments.

He admitted that some job losses were inevitable, but refused to be drawn on numbers, saying the company would reserve judgement on staff cuts. Analysts speculated that up to 100 positions could go.

Nigel Stapleton, co-chairman of Reed, said tax benefits would make the acquisition earnings-enhancing from the outset. He added that combining Chilton's operations with Reed's business information and exhibitions divisions would offer "opportunities for revenue growth and operational synergies".

City analysts said they were impressed but not overwhelmed by the deal, believing Reed had paid a fairly full price. Alastair Smellie, media analyst at ABN Amro Hoare Govett, said Reed could do a dozen similar-sized deals before the end of the year.

Derek Terrington, media analyst at Teather & Greenwood, was particularly positive about the synergies between the two company's manufacturing and entertainment trade magazines. He added: "It's a very good deal. It's a classic publishing acquisition because of the good fit of the businesses."

Reed said yesterday that it had been working on plans to develop an on- line news and information service for the entertainment industry. The company said the purchase of Chilton's magazines had added momentum to this project.

Reed has been keen to accelerate its move into global electronic distribution, signing a deal with Microsoft in May which allowed it to put scientific, legal, business and travel information on the Internet.

Yesterday's acquisition was the second big US purchase this year. Reed bought MDL Information Systems for $320m earlier this year.

In the year to the end of December 1996, Chilton reported profits before tax of $28m on revenues of $203m.