Reed Business Sale and Choicepoint

The Financial Times reports that the price Reed may get for the sale of RBI will be far below their original expectation of £1.25Bill. In the article they quote someone suggesting a sale price of £750mm with the expectation that a sale would go ahead regardless.

The deal's financing is now in place but the sticking point is the deterioration in trading at RBI into 2009 as the economy weakens. Reed would not comment on a lowest acceptable price.

One analyst said: "I think it is worth Reed's while to sell low. If RBI went for £750m rather than £1bn, all they lose is £250m of cash. While it is helpful to have that on the balance sheet, at the end of the day it is only £10m of extra interest.

"The alternative is that . . . the market automatically values RBI in the sum of parts at £750m-£800m anyway and you get left with a cyclical business that will see downgrades and will be under pressure for a couple of years."

There are three groups with a serious interest but the article does not indicate when a sale will be announced. Reed will be pressing for a resolution as soon as possible.

In other related news, the Federal Trade Commission is requiring that Reed divest some part of Choicepoint in order for approval of the acquisition to proceed. The FTC believes that the combination of the Reed and Choicepoint public record business would diminish competition significantly and as a result Reed is being required to sell a part of this business to Thomson West. (Link: From September press release)

To eliminate the anticompetitive effects of the proposed acquisition, the FTC will require Reed Elsevier to divest assets related to ChoicePoint’s AutoTrackXP and Consolidated Lead Evaluation and Reporting (CLEAR) electronic public records services to Thomson Reuters Legal Inc., within 15 days after the proposed acquisition is consummated.

Through its LexisNexis division, Reed Elsevier provides electronic public records services to law enforcement customers in direct competition with ChoicePoint’s AutoTrackXP and recently, ChoicePoint’s CLEAR, a new and advanced electronic public records service. Together, the two firms account for over 80 percent of the approximately $60 million U.S. market for the sale of electronic public records services to law enforcement customers.

“The proposed acquisition would have eliminated the intense head-to-head competition between LexisNexis and ChoicePoint that has lowered prices and led to product innovations for a critical law enforcement tool,” said David P. Wales, Acting Director of the FTC’s Bureau of Competition. “The action announced today ensures that law enforcement customers will continue to benefit from this competition as they attempt to keep pace with increasingly sophisticated criminal activity.”