Reed puts pounds 1bn of publishing on the market

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The Independent Online
MATHEW HORSMAN

In a further shake-up of the UK media sector, the giant Anglo-Dutch publishing company Reed Elsevier has put its consumer publishing interests, worth as much as pounds 1bn, up for sale.

The assets include Reed Regional Newspapers, the UK's largest free newspaper pubisher, and Reed Consumer Books, which groups several UK book publishers, including Heinemann, Methuen and Secker & Warburg.

Also on the block are the company's Dutch newspaper interests and its US consumer magazines division. IPC, Reed's UK consumer magazine group, is not for sale.

"The key issue for us is strategic," John Mellon, an executive director of Reed Elsevier, said. "This will allow us to focus on our core activities of scientific and business publishing." These operations were responsible for two-thirds of the company's turnover last year of just over pounds 3bn.

The announcement was unexpected at Reed Regional Newspapers, where chief executive Jim Brown offered a terse statement. "This is a surprise, in that RRN titles are performing well. It will be a few months before the business is sold. In the short term, no change should be expected in the way the operations are run."

News of the intended auction follows hard on the heels of the sale last week by Thomson of its regional newspapers to Trinity International in a deal worth pounds 327.5m.

Analysts said Pearson, the media and entertainment conglomerate, might be the next candidate to sell its regional newspapers, grouped under Westminster Press.

A Pearson spokesman said there were no current plans to sell its regional titles, despite persistent rumours.

"This is a good move by Reed Elsevier," Guy Lamming, media analyst at Goldman Sachs, said. "It allows them to focus on better-performing, core businesses." Analysts expect the company to spend the proceeds on US and continental European acquisitions, particularly in specialist and electronic publishing.

The assets to be auctioned, which last year earned pounds 76m on turnover of pounds 575m, had posted consistently lower profit margins than electronic and specialist publishing.

"Selling these operations will improve the quality of the company's earnings," media analyst Christine Munro, at Hoare Govett, said.

Mr Mellon, who is to oversee the sell-off, said the company had not held serious discussions with any potential buyers, although he said there have been "several expressions of interest". SBC Warburg has been retained to handle the sale of Reed Regional Newspapers, while Goldman Sachs will handle the auction for Consumer Books and the small US consumer publishing operations. Mr Mellon said the process was likely to take several months.

The Dutch interests may be sold through a flotation.

Possible buyers for the UK regional newspaper group include Conrad Black's Telegraph group, Tony O'Reilly's Independent Newspapers, Associated Newspapers and the Mirror Group.

David Montgomery, chief executive of the Mirror Group, said: "We look at everything." He added that the company was also interested in Thomson's Scottish titles, which were put up for sale last week.

Other buyers for Reed's titles might include regional publishers such as Midland and Emap. Chris Oakley, chief executive of Midland, publisher of the Birmingham Post, said: "We'll look at them. There can't be too many regional publishers who have not expressed an interest in at least a few of the titles. We have to decide whether there are any opportunities for us."

Analysts suggested the regional newspaper group might be broken up and sold to several different buyers. A single buyer with newspaper holdings might have trouble getting approval from the Monopolies and Mergers Commission.

The book-publishing arm might attract a bid from Thorn EMI, which bought the Dillons' book chain earlier this year and is rumoured to be interested in publishing.

Investment Column, page 18

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