Elsevier's SciVal Strata: Evaluating Researchers

Elsevier announced the availability of SciVal Strata (an odd name) which enables a user to evaluate the performance - both actual and projected - of individual or teams of researchers. The product uses data from Scopus and the tool can be used by all members of a subscribing institution to demonstrate research excellence and to secure, allocate and measure return-on-investment of funding. Applications for the tool could include recruitment, promotion and/or collaboration and project planning.

Scopus is the largest abstract and citation database of research literature and quality web sources covering nearly 18,000 titles from more than 5,000 publishers and its' use in this context is interesting. It is yet another Elsevier example of using data mining to extract value where it might not otherwise be obvious.

More from the press release:

SciVal Strata allows researchers and decision makers throughout academic and governmental organizations to evaluate performance and demonstrate the value of research in ways that are most relevant to their career stage, field of expertise and topics of interest. Moreover, it enables users to envision alternate research groups by ‘dragging and dropping’ any researcher across the globe into hypothetical teams and gauge expected changes in performance by benchmarking ‘fantasy’ groups against existing groups. Developed in collaboration with research organizations and powered by the breadth of Scopus, SciVal Strata provides a unique context for decision-making by visualizing the performance of teams and researchers both inside and outside of an organization.

“This tool complements current methodologies used by universities and government agencies by measuring the performance of research teams and individuals in ways that were not possible before,” said Jay Katzen, Managing Director of Elsevier Academic and Government Products. “SciVal Strata can help users make more informed research decisions based on relevant benchmarks and measures, such as citations or document output. This new approach will empower users to more accurately assess research performance according to criteria most important to them and help justify funding, hiring decisions and partner opportunities.”

Speculation over Reed Elsevier (Again): Missing the Bigger Point

Several UK Sunday newspapers report new speculation about the future of Reed Elsevier and specifically whether the company could be ripe for a private equity buy-out. Shares were volatile on Friday in what could be more a reflection of market boredom than anything else. Since Erik Engstrom took over the CEO role a year ago, analysts have speculated that the company would either shed assets or be taken private given the company's languishing share price and inconsistent performance across the group. Last week the company confirmed their full year guidance which calls for "modest" erosion of margins given a strained revenue outlook (Bloomberg):

“As previously stated, a modest reduction year-on-year in adjusted operating margin is expected due to a weak revenue environment and increased investment in legal markets,” the London-based company said in a Business Wire statement today. “Any sustained recovery is expected to be gradual and remains dependent on economic conditions.”

Subscription sales in many professional markets are still constrained by “low customer activity levels and budgets,” while advertising and other cyclical markets continued to stabilize, according to the statement.

“In the second half we have continued to sharpen our focus in key markets, through new product development, increased sales and marketing activities, and portfolio realignment,” Chief Executive Officer Erik Engstrom said in the statement.

Weakened renewal subscriptions are likely to constrain revenue for sometime given annual subscription cycles in addition to weakness in the professional markets such as their legal market. The company has sold off some smaller business and products - last week they sold a German business unit to Wolters Kluwer for example but in total these seem minor compared with what analysts and potential private equity investors may be contemplating.

The Telegraph tries to put some more meat on the bones of a somewhat old story by suggesting that the management team at Reed Exhibitions is working with private equity groups Cinven and Apax to prepare a bid for the Exhibitions business unit. Private equity as said to respect the management of the group: Whether Engstrom respects them on Monday morning may be another story.

These titillating financial stories gloss over some difficult issues for Reed Elsevier. In particular, the company is likely to see significant competition from Bloomberg as that company aggressively targets the legal and regulatory market place. Unfortunately for Reed, they may be strategically limited by not having a strong financial and business news unit which is the core of Bloomberg and which Thomson West - their other competitor - possesses in Thomson Financial & Reuters. (A deal between Reed and Reuters would have been strategically more important than the deal the company ultimately made to acquire Choicepoint). Whereas information companies built their businesses over the past 15yrs on organization around silos - financial, news, medical, legal, etc. - the rapid improvement in search, taxonomies and user interface are enabling information companies to 'reintegrate' their siloed content. This is where Reed maybe disadvantaged vis a vis Bloomberg and Thomson and whether that can be solved by taking the company private is a crap shoot. But then, that's what private equity is good at.

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Michael Cairns

See also Crains (Reg Required). C/P headline into Google.

Elsevier Introduces SciVerse

I've mentioned that information and academic publishers are starting to open up their data to third party applications providers and, in the process, enable greater utility for their subscribers and users. SciVerse, announced today by Elsevier, is a platform for doing just that. For a publisher of this size and importance to academics, professionals and institutions this initiative should be considered quite important as it represents a significant (and logical) step in the evolution of information database publishing.

As the press release states, SciVerse is "an innovative platform that integrates the company's key products and encourages the scientific community to collaborate on the development of customized search and discovery applications. Elsevier has committed to releasing the APIs (application programming interfaces) for all of the content on SciVerse and will offer application development support tools on the site."

SciVerse will be impressive from the start and will incorporate ScienceDirect, Scopus and targeted web content from Scirus, Elsevier's science-specific Internet search engine. Built into the platform will be some basic but useful technology which will enable efficient cross database searching and other functionality, but what Elsevier is banking on (and, it seems a pretty safe bet given the quality of this content) is that third party application providers will provide significant ingenuity in building applications that Elsevier's subscribers will find useful. As Jay Katzen, Managing Director, Academic & Government Products, Elsevier notes,

"SciVerse is a start of a new journey for Elsevier where we plan to provide customized search and discovery solutions and increase interoperability within our products and third party services. We recognize that it is critical to involve the researchers and librarians in the creation of solutions as they are in the best position to identify and address their search and discovery challenges. By providing our content APIs later this year, we will empower researchers and developers to build custom applications to enhance their workflow and share these applications with the scientific community within SciVerse."

Elsevier will open up SciVerse to the developer community (many of whom are likely to be their subscribers) later in the year and the mechanism for doing this isn't clear; however, it is likely that their will be some type of registration and/or approval process similar to the Apple apps store process. Whether or how Elsevier will share in revenues that may be generated by some of these new apps is also unclear; however, should this be a practical outcome of this initiative it may end up driving some substantial incremental revenue for Elsevier. Most importantly though, this initiative will ultimately tie Elsevier content even firmer into the workflow and processes of their customers as these applications address specific problems for customers. This aspect shouldn't be under valued as an important contributor to the continued growth of the Elsevier product line. It will be interesting to see how other information and academic publishers react to this news.

Curating Research Data at Elsevier

Elsevier announced a partnership with Pangaea which is a 'data library' that links primary research data with journal articles in earth and environmental science. As I mentioned last week, information and academic publishers like Elsevier have long organized themselves around content areas but are now 'widening' their content 'silos' to accommodate tools, techniques and proprietary data provided by third parties. This is a good example of how the Elsevier 'platform' can and is being leveraged beyond what may have originally been envisioned as a closed system.

From their press release they note that this initiative extends one announced in February,

This next step follows the introduction, last February, of 'reciprocal linking' - automatically linking research data sets deposited at PANGAEA to corresponding articles in Elsevier journals on its electronic platform ScienceDirect and vice versa. The new feature adds a map to every ScienceDirect article that has associated research data at PANGAEA; it displays all geographical locations for which such data is available. A single click then brings the user from the ScienceDirect article to the research data set at PANGAEA.

"With an increasing interest in the preservation of research data, it is very important to make those data clearly visible in the context of the formal research publications," commented Jan Aalbersberg, Vice President Content Innovation at Elsevier. "Elsevier is committed to advance science by investing in such collaborations with data set repositories. This new feature will allow readers to easily go beyond the content of an article, and drill down to the research data sets."

As the press release goes on to say, we are starting to see how the web, the use of api's and other methods are eliminating the inefficiencies in sharing research data and analysis which academics have had to navigate around for many years. Ironically, while these large information companies may 'open' their platforms to produce much more utility for their subscribers, they may also be strengthening their positions as the clear leaders in providing information, analysis tools and other key functionality for their users. Their strategy continues to reflect the curation model I've discussed before although the evidence of this now extends far beyond the concentration of topic based content.

Prior post on Massive Data Sets
Posts on Content Curation

Elsevier's Journal of The Future

Journal publisher Elsevier has announced a beta project to re-think the journal article. In collaboration with their journal Cell, the company's innovation team has set up two beta sites that solicit feedback on how technology can improve the experience of both the journal contributor and the consumer.

Elsevier is the world's largest publisher of scientific and medical content and its results from what they describe as the 'journal of the future' will be watched closely by subscribers and competitors.

The concept attempts to make impressive use of current technology to aid the navigation of the journal article content, to provide more graphical and multimedia content and enable better and more effective linking to related content.

In summary, there are some of the features the publisher notes on the Cell beta site:

• A hierarchical presentation of text and figures so that readers can elect to drill down through the layers of content based on their level of expertise and interest. This organizational structure is a significant departure from the linear-based organization of a traditional print-based article in incorporating the core text and supplemental material within a single unified structure.
• A graphical abstract allows readers to quickly gain an understanding of the main take-home message of the paper. The graphical abstract is intended to encourage browsing, promote interdisciplinary scholarship and help readers identify more quickly which papers are most relevant to their research interests.
• Research highlights provide a bulleted list of the key results of the article.
• Author-Affiliation highlighting makes it easy to see an author’s affiliations and all authors from the same affiliation.
• A figure that contains clickable areas so that it can be used as a navigation mechanism to directly access specific sub-sections of the results and figures.
• Integrated audio and video let authors present the context of their article via an interview or video presentation and allow animations to be displayed more effectively.
• The Experimental Procedures section contains alternate views allowing readers to see a summary or the full details necessary to replicate the experiment.
• A new approach to displaying figures allows the reader to identify quickly which figures they are interested in and then drill down through related supplemental figures. All supplemental figures are displayed individually and directly linked to the main figure to which they are related.
• Real-time reference analyses provide a rich environment to explore the content of the article via the list of citations.

Here is the link to the beta version of the journal itself. (Cell Beta).

MediaWeek (Vol 2, No 11): Voyager Learning, ReedElsevier, CBS Radio, Libraries

Near Norwich, Bertrams were sold for £8.6mm and all 600 staff were kept on. A remarkable event given the state of UK bookselling. Smiths News is the purchaser. Reed is paying Pat Tierney a £2.4m bonus and The Times suggests shareholders will be pissed. Tierney ran the educational unit (Harcourt) which Reed sold for a large premium over what they purchased it for. In addition, Tierney deferred retirement to take care of the sale process. A good backgrounder on how legal publishing works from a taxonomy and text mining perspective. (Legal Technology). ReedElsevier's earning call transcript (SeekingAlpha).

As far as the 2008 financial performance, 15% earnings growth and that is our highest for many years, and I think in this market, it is an excellent performance. Good above-market revenue growth we’ve seen for Elsevier, LexisNexis, and Reed Exhibitions, our core businesses. All three of those businesses, I think, did very well in terms of organic revenue growth.

Our focus in the last two or three years on accelerating margin improvement is paying off with 110% basis point margin improvement. We had a record year in terms of cash conversion, 102% of operating profit into free cash flow, that’s just £1 billion, which is an extraordinary number of free cash flow. Return on capital employed rose for the fifth year in a row. It is now about 12% and obviously significantly ahead of our cost for capital, and I think after the 1.5 billion corporate bond issue in January and the renegotiation of the revolving credit facility, we are now financially in a good position and with well-spaced debt maturities going forward. - Sir Crispin Davis

A shareholder suit against the remaining parts of what was Proquest and is now Voyager Learning is going ahead. (Law360). Voyager also announced their full year 2008 results (Press Release):

• Net sales for 2008 were $98.5 million, a decrease of 10 percent from net sales for 2007 of $109.6 million.
• Gross profit decreased $10.8 million in fiscal 2008 to $62.6 million compared to $73.4 million in fiscal 2007. The gross profit margin also decreased to 63.5 percent in 2008 compared to 67.0 percent in fiscal 2007.
• Loss from continuing operations before interest, other income (expense) and income taxes was $83.3 million in fiscal 2008 compared to $104.4 million in fiscal 2007. The Company had adjusted EBITDA, reflecting ongoing business operations, of $15.8 million in 2008 compared to $28.7 million in 2007, where adjusted EBITDA excludes depreciation and amortization expense, goodwill impairment charges, costs to terminate leases in Ann Arbor, Michigan, and corporate overhead costs which were predominantly for restatement related activities in 2007 and 2008.

The good news is the company is 'all caught up' in their long running financial reporting saga. (PND) The company is still looking to be acquired. The Chronicle reports on belt tightening in the library world (this year and next will be tough for vendors).

Greg Doyle, electronic resources program manager of the Orbis Cascade Alliance, in Portland, Ore., describes his group as "a buying club" that represents 36 academic libraries at public and private institutions in Oregon and Washington. I buttonholed him after he made lengthy stops at the Oxford and Ebsco exhibits.

Mr. Doyle is not afraid to use the word "dire" to describe the economic situation that faces his alliance's members. "Right now everybody's budget is terrible," he said. Many don't yet know just how bad the cuts will be. To prepare for the worst, though, they "are actively identifying databases to cut."

HyperLinked data from Tim Berners-Lee (TED Video). There is also a related video from 2006 meeting about using data sets in new ways which is very interesting. (TED Video) The library of the future being built in Palo Alto? Not really but this is an interesting article on how (public) libraries will evolve from an unusual source. I liked this bit:

Loertscher teaches his library-science students to use the "learning common" tool, in which an information professional sits in on an online conversation, helping teachers and students who have created assignments and projects on iGoogle pages. The librarian in coming decades "will burrow right into the center of where the clients are now," commenting on assignments and offering reference and research materials that support projects, Loertscher predicted. In his model of the future, the librarian goes into the student's space, rather than the student coming to the building, he said. "It's very proactive and moving into the space where kids (are comfortable). You have to take their social-networking skills and bend them over into their learning skills," he said.

Some lessons to be learned in the way CBS is managing their radio stations and the seemingly misguided understanding of their key market. (CrunchGear).

We now turn to Mr. Bouloukos’ comment, that young people—most of you guys are young people, I would guess!—are “using the radio to discover today’s most popular music.” First off, that wording is just wrong. If a song is already popular—remember, 92.3 Now will only only play “hit music”—then the odds are that people have already heard it before; in other words, hit music is already popular! A song becomes popular when a lot of people know it, and enjoy it. If a song is popular, then people aren’t, by definition, “discovering” it! (Amateur Hour at CBS Radio, apparently.) Even giving Mr. Bouloukos the benefit of the doubt, that what he meant to say is that people are using radio to discover new music… well, good luck bro. I’d like to find the last 17-year-old in America who is using commercial radio as his primary source of new music. I mean, it’s not like these kids are using THE INTERNET to find new music, right? MySpace Music, music blogs like Hype Machine, sites like Imeem and YouTube, etc. (Then these kids turn around and buy said music either directly from the band’s Web site, or use iTunes or, yes, download it “from BitTorrent.” (BitTorrent is an Internet protocol; you don’t download things “from it.”)

Swan Song for Sir Crispin

Reed Elsevier presented a robust end to 2008 with the presentation of their end of year numbers yesterday. In constant currencies, RE revenues were up 7% over 2007 and operating income was up 12%. Underlying results were slightly less at 4% and 9% respectively.

Reed Elsevier revenues finished the year at £5.3billion and earning per share were up 15% in constant currencies and the press release points out this is their highest growth in 10 yrs. As expected Elsevier, Lexis and Exhibitions all drove revenue and operating income growth and while Reed Business Information was the laggard the business hardly fell off a cliff during 2008.

From the press release:

“Reed Elsevier has had a very successful year with major progress in developing the business, and the strongest constant currency adjusted eps growth in a decade. Good revenue growth was seen across most of the business driven by the growing demand for online information and workflow solutions. The revenue growth and a strong focus on restructuring and cost management delivered meaningful margin improvement and the operating cash generation was excellent. Whilst the economic environment has become progressively more challenging, our business is more resilient than most and we are in a strong financial position.

The year saw demonstrable progress across the business from our continued investment in new content and online product development. In Elsevier, subscription renewals reached record levels whilst other online solutions for the scientific and healthcare communities grew rapidly. Online legal information solutions have continued to expand, and there is growing demand for information analytics in the risk market. In legal research we see significant opportunities for more intuitive and interoperable offerings to enhance customer productivity and are stepping up our investment to reflect this. Reed Exhibitions had an exceptional year including the benefit of non annual shows cycling in. Reed Business Information held up well for most of the year, helped by the strong growth of its significant online franchises. In the last quarter, however, the business increasingly felt the impact on advertising markets of the global downturn.

The year has also seen a major reshaping of our business with completion of the sale of the remaining Harcourt Education businesses and the acquisition of ChoicePoint. ChoicePoint transforms our position in the risk information and analytics sector and the strategic and financial benefits are very attractive. The business has performed well with the insurance data and services business, which accounts for the substantial majority of ChoicePoint’s operating profits, delivering 10% year-on-year organic revenue growth. The integration with our existing risk business is progressing well and we are confident of achieving our savings and returns targets. We were disappointed not to be able to sell Reed Business Information but the macro-economic environment and poor credit market conditions made it too difficult to structure a transaction on acceptable terms. Whilst the short term outlook for RBI is very challenging, RBI is a high quality business, with a strong management team and a record of success in developing online services. It remains our intention to divest RBI in the medium term when conditions are more favourable.

Buried in the report was also the expected news that RE have reduced what was a $300mm (€230mm) investment in Harcourt parent Education Media and Publishing Group (EMPG) to just €15m. The equity stake that RE was forced to take in Harcourt when the business was sold represented just less than 12%. Companies do use their own judgment (there are FASB rules) when re-evaluating the value of third party investments like this one however, this action isn't likely to impress the bankers who lent $7Billion to EMPG for their acquisition spree.

Management Powerpoint Presentation

MediaWeek (Vol 2, No 4): Houghton Harcourt, Ebsco, Google

This is my 1001st post - wow. Riverdeep, the owner of Houghton Mifflin Harcourt is the subject of a profile by The Boston Globe this morning. The newspaper reports what many have supposed - not least the Irish Press which has been dogging Riverdeep almost since the day they consummated the Houghton sale. In the article, they strongly suggest that the company is now worth far less than the amount of debt owned to their lenders. Any sale of all or parts of the company would be unlikely to cover these obligations and while there are rumors that Hachette maybe discussing acquiring the trade division, I wonder if this could occur if the value is so low and the resulting deal would be a humiliation not just for Riverdeep but also the banks holding the debt. Assuming a sale below book value, that would trigger a revaluation of the whole balance sheet and this in turn would trigger any number of covenants. Missing from the Globe article is that in selling Harcourt to Riverdeep, Reed Elsevier retained a $300mm interest in the business. (Link) What of the value of that and how is it handled on the RE balance sheet.

Moody's last month reported that Houghton, with a debt load estimated at more than 10 times gross earnings, is "a likely default" unless its loans are renegotiated. S&P last month placed parent EMPG on its list of weakest links - companies in greatest danger of debt default. "The debt level is our biggest concern," said S&P analyst Hal Diamond, "given the state of the economy and state budget constraints. While they can reduce costs, they can only go so far."

The Globe's request for an interview with Houghton Mifflin Harcourt chief executive Anthony Lucki or other senior executives was declined. Houghton issued a statement disputing Moody's 10-times-earnings figure, and insisted the company is gaining market share and has ample cash to cover its loans. Spokesman Josef Blumenfeld also said that since Houghton's reported decision last fall to suspend acquisition of new titles, it is signing new books again. He declined to comment on rumors that French-based Hachette Book Group, owner of Little, Brown & Co., might be a suitor.

EBSCO have added a Federated search capability to their suite of offerings and is designed to integrate with their EbscoHost2.0 product they released last year. (LJ)

With Integrated Search, the company aims to capitalize on users’ familiarity with the features and design of EBSCOhost 2.0, which debuted in July 2008, and carve out a role for its interface as a comprehensive destination for user searches. Integrated Search is slated to go live in early summer 2009.

Integrated Search will use connectors to remote content sources similar to those employed by other federated search products, like MetaLib (Ex Libris), Research Pro (Innovative Interfaces), and 360 Search (Serials Solutions). The hook: EBSCOhost will not charge customers for connectors to any EBSCO databases to which they subscribe. For connectors to non-EBSCO sources, the basic cost will be $200 per database annually. There will also be a $1000 annual base fee per site and per configuration. Customers already subscribed to a number of EBSCOhost products could see this translate into significant savings.

Librarything has added a Twitter ap. which looks interesting. (Blog):

We've added integration with Twitter, the popular SMS/microblogging site. Basically, it's an easy way to add a book to your LibraryThing while standing in a bookstore, library or friend's house.

A good summary of the Google Book agreement was presented at a session at ALA (ALA):

ALA’s Committee on Legislation and Office for Information Technology Policy hosted a panel session Saturday at the ALA Midwinter Conference in Denver. The session was called “Google Book Settlement: What’s In It For Libraries,” and aimed to educate librarians on the initial terms of the settlement, hear from leading a few leading library and legal experts, and offer time for audience members to pose questions to the panel participants.

Library Journal reports on the finances of the American Library Association.

As with private investors and endowed institutions, the American Library Association (ALA) suffered significant endowment losses in the past fiscal year, 24.1%, but, thanks to budget adjustments and some new sources of revenue, net operating income in Fiscal Year 2008 actually exceeded expenses more than in FY 2007, ALA officials said yesterday at the Midwinter Meeting in Denver.

Fiscal Year 2008, which ended last August 31, left ALA with net assets of $34.4 million, compared to $33.3 million at the end of 2007. Three months later, net assets declined to $24.1 million, primarily due to endowment losses. ALA has adjusted by reducing expenses, but continued losses in the endowment—which is not relied on for operating income--could cut into scholarships and awards. And the longer term remains a question mark.

Elsevier Journals Under Fire

Chris Lee at Ars Technica has some harsh things to say about Elsevier's bundling policy and the quality of their journals:

If the quality of a journal falls, or is filled with pseudoscientific garbage, subscriptions will be cancelled. In this case, libraries will need to start analyzing usage patterns more carefully. Has anyone downloaded a paper from Chaos, Fractals, and Solitons since it turned into a journal of numerology? If the mathematics department at your local university knew about its content, would they still want it in the university? These are questions that should be subjected to regular review, but the bundling practice makes asking them useless. Universities should have the power to cancel these subscriptions without looking forward to a huge increase in subscription fees.

It would be nice to think that Elsevier will listen to scientist, but I suspect that this will not happen until scientists start getting a little more strident. If you are scientist, publish your work in society journals rather than Elsevier journals. Try to avoid citing work published in Elsevier journals. Elsevier lives by a combination of pricing and impact factor, and scientists have direct control over only one of these—impact factor. Librarian could start looking at Elsevier journal usage patterns; perhaps they can follow Cornell's example, and subscribe to just a few Elsevier journals.

Reed Business

As an update to yesterday's post about RBI's CEO van de Aast, Bloomberg is reporting that bids may come in at around $1bill. which is half the amount expected. What is unknown is whether that figure assumes an ownership stake in the divested business. For example, if Reed retained a 40% ownership in RBI (admittedly a lot) then this would translate to a value of $1.4billion which is still substantially less than the proposed amount almost a year ago but not as bad as the half off sale price. If the $1bill is for 100% then Reed is in a pickle since they may not want to take such a low price but they don't have a CEO. Not forgetting that they have debt to pay back for Choicepoint.

Reed Business CEO to Leave

Reed Elsevier announced yesterday that Gerard van de Aast will be leaving his position as CEO of RBI on December 15th. Kieth Jones will be stepping in to fill the position on a temporary basis. Spectators will understand that this situation further complicates what has been a long frustrating process for Reed in attempting to get rid of this business.

The company has announced that discussions on the sale are at an advanced stage (but that's no guarentee, etc.). Perhaps this move by van de Aast is a precursor. Maybe he is be fronting one of the buyers groups.

Reed Name Smith as CEO Designate

Ian Smith has been named to replace Sir Crispin Davis as CEO of Reed when Davis retires early next year. Smith will join Reed in January. Who is he? Well, he has no media experience for a start and comes most recently from the construction company Taylor Woodrow. During his short tenure at TW, he apparently engineered a very large merger with competitor George Wimpey which has lead many to speculate that Reed's board is focused on a mega-merger of its own once the recent Choicepoint acquisition is decided.

As the primary reason for the hire, the association with deal making could be tenuous because Davis engineered a number of large deals during his tenure. As examples, the acquisition and subsequent divestiture of Harcourt, the acquisition of ChoicePoint and the protracted divestiture of RBI. In addition, if the Reed board were looking for a pure deal maker then there would have been any number of media experienced private equity players who could have fit the bill. Nevertheless, without any other logical connection to the Reed business, this is what most reporters are focused on. This argument also allows them to discuss the long protracted idea that bringing Wolters Kluwer and Reed Elsevier together would make great sense. Perhaps for WK but not as much for Reed in my opinion.

In my view, I think the ChoicePoint acquisition is a better indicator of the type of acquisition strategy that Reed may follow. They want to own distinct verticals and to play in these verticals they plan to acquire the biggest player to achieve immediate scale. I think WK may actually be too small for what they may be considering. For example, they don't have a presence in the Financial sector: would they see Bloomberg as a target? Remember they compete with Thomson Reuters in several areas and Thomson has a big financial information business. Wider afield, Reed may be looking internationally to acquire very large information companies that will broaden their current offerings into both mature and developing markets.

One other interesting aspect of the hiring of Smith is what the board must be thinking about the crop of senior executives below Davis. Some of these executives have extraordinary experience both with RE and with other publishing companies. Several (at least three senior executives are in their mid-late 40s to very early 50s) so perhaps the board didn't feel one of these executives was more ready than their colleagues (or they were not willing to risk upsetting the apple cart by promoting one of them). The board may have decided to wait six years or so to make their choice from this crop of executives to choose the next CEO to replace Ian Smith.

FT.

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.”

Bertelsmann Interested in Reed Business

Reuters reports that Bertelsmann's magazine unit Gruner & Jahr maybe in the mix to acquire the RBI unit from Reed Elsevier. Reuters learned of the tip via a German newspaper. In the report, Reuters also notes that indications of interest for the RBI business unit have been received and offers range between £1.0bill and £1.25bill. If correct, this range appears to match Reeds initial expectations for the deal. Reuters expects final bids to be submitted in October. Followers of Bertelsman may recall they have created a sizable fund with some PE companies with the express view to make some large (or one very large) deal. They objective was to be able to participate in the bidding process for these large media deals and not be priced out by pure PE deals. As a case in point they were very interested in the Cengage auction last year and by some accounts came quite close.

Reuters

Reed Shares Up 5% on Buoyant News

From the Reed Elsevier press release:

• Strong business momentum and financial performance
• Restructuring programme on track to deliver further margin improvement
• Sale of Harcourt Education fully completed; net proceeds of £2.0bn/€2.7bn returned to shareholders
• Divestment of Reed Business Information in progress
• Agreed £2.1bn/€2.7bn acquisition of ChoicePoint, Inc. expected to close in H2

Reed Elsevier's Chief Executive Officer, Sir Crispin Davis, commented:

"We have seen a strong performance across our businesses in the first half despite a more challenging economic backdrop and we remain on track to deliver on our goals this year of good revenue growth, meaningful margin improvement and accelerated earnings growth. We have made good progress in implementing our plans announced in February to accelerate growth: the planned divestment of Reed Business Information is progressing and we are seeing strong buyer interest in the business; the agreed £2.1bn/€2.7bn acquisition of ChoicePoint, Inc. in the fast growing risk information and analytics markets is moving through US regulatory review and is expected to complete in the second half; our major restructuring programme to deliver £245m/€310m of cost savings over the next four years is on track with the initial targeted £15m/€19m of savings to be delivered this year. Whilst the professional markets we serve are not immune to economic cycle effects, they are more resilient than most. This, together with the changes we are making in the business and the growing demand for our online information and workflow solutions with the customer productivity they provide, gives us confidence in the outlook.”

Further notes from their presentation:

• Online revenues growing at 10+%
• Online revenues exceed 50% of total revenues.
• Aggressive program of infrastructure cost management including outsourcing and real estate
• RBI: staple financing in place, strong interest, divestiture expected in second half, good operating performance despite difficult environment
• Choicepoint integration well advanced. Synergies on track
• Outlook: Strong across the board with Elsevier book program, LN online solutions, Exhibitions cycling all noted as positive drivers for H2
• RBI H1 Revenues up 3% and Op Income up 7%. Online growth up 20% to 34% of total RBI revenues. 4% print decline.

McGraw Hill Plotting to Buy RBI

The Telegraph handicaps some of the interest in the sale of Reed Business information and offers the intreging notion that MGH would purchase the Reed titles. What they don't discuss is what would happen afterwards. As I have speculated, some assets are likely to be sold after a sales of RBI and this article compares the 'overlap' between the RBI titles and those currently owned by MGH.

The McGraw Hill Companies, owner of Standard & Poor's credit rating agency, has titles which overlap with RBI in aviation and construction. McGraw publishes aviation Week and a collection of architectural and engineering titles, while RBI has a large portfolio of construction titles including Construction News and Professional Builder.

And:

The sale of Reed Business Information (RBI), whose titles include film industry bible Variety, Flight International and New Scientist, began last week when information was sent to prospective bidders. If RBI fetches the asking price, it would be the biggest media takeover since the sale of Emap at the end of last year.

Reed Business Sale Delay

The FT reports that Reed is delaying the circulation of information relating to the sale of their Reed Business unit in advance of finalizing a financing package that could be made availale to prospective buyers. The newspaper also establishes expectations that the unit could sell for $2.5Billion. From the article:

Another source close to the situation said that there is ”an irrational fear of a downturn in advertising revenues,” and there is a lot of advertising in the group. The source added, however, that Reed is still an attractive deal with senior leverage unlikely to be more than 3x EBITDA. Those low leverage levels should be enough to encourage bidders against a possible downturn in the economy, specifically advertising revenues, the source added. While Reed Elsevier is hoping to encourage a sale of the whole of RBI by offering a financing package to prospective buyers, it is also offering financing packages for parts of the business, one source said. The source said he thought that Reed would ultimately still sell the business as a whole despite marketing a sale of parts in tandem. This way, mid-sized players would also be in the process to drive up the end price for the asset, the source explained

Informa and UBM in Take-Over Discussions

Several UK newspapers (Telegraph) are reporting that United Business Media has initiated discussions on a £3billion take over of Informa. UBM has not been as active as other media companies over the past several years in expanding their business offerings, on the contrary the company has deleveraged the business and is now a company with relatively low debt. In the US, UBM owns PRNewswire and runs conferences, trade magazines and data and information products through the CMP and Commonwealth Business Media brands. From The Telegraph:

The Sunday Telegraph has learned that United Business Media (UBM), which has a market value of £1.5bn, has approached £1.6bn Informa about a merger that would establish a powerhouse in the increasingly competitive world of business-to-business media. Discussions between the two companies are at a very early stage and are not yet thought to have progressed as far as substantive negotiations about the structure or price of a potential combination. UBM and Informa may come under pressure to confirm the talks to the London Stock Exchange as early as tomorrow morning.

Informa has been considered a buyout candidate over the past several months since their long time CEO David Gilbertson left to run PE led Emap Communications. Business media and conferencing companies have become hot properties because their subscription based business models mitigate much of the variability in advertising based businesses. Steady cash flow is highly desirable.

More Informa

In the ebb and flow of big media deals it is interesting to note that having spent the last several years on the sidelines unable to compete with the very large multiples that PE players were prepared to pay, some operators like UBM may be well positioned to make significant strategic acquisitions as those same PE companies become skittish in the current market. Last week we saw CQ Press acquired by SAGE and an effort by Reed Elsevier to sweeten the pot for potential acquirers of Reed Business. Analysts are now suggesting that RE may be unable to sell the RBI unit in one piece which would have been unheard of only 18mths ago.

Update Monday: Telegraph confirms discussions and notes share price jump


Other reports:
Forbes picks Candover but not until summer.
Earlier report from The Telegraph proposes other bidders including Axel Springer.
TimesOnline: Informa Garners Attention

Reductions at Reed Business

Folio is reporting that 41 positions have been eliminated at PW, Variety and Broadcasting & Cable. From their report:

Shortly after the announcement, RBI CEO Tad Smith, in an internal memo, tried to reassure RBI staffers that their jobs would be intact—including his own. "I am committed to leading our business as your CEO during the sale process and thereafter," Smith wrote in an internal memo. "In the meantime, business will continue as usual and everyone's jobs, benefits and pay will be unaffected."

No doubt that sets everyone's mind at rest. Folio used the work 'slashed' but it would be hard to characterise it this way especially since in the same article they quote an insider saying that the division has been able to replace most (if not all) open positions since the start of the year. These amounted to over 200 positions so 41 job eliminations seems minor (unless you lost your job obviously - and apologies etc.)

During a sale process the seller would want as few disruptions as possible and what this action suggests is that Reed is now resigned to a much longer sale process than originally thought. HQ is most likely demanding that the operating unit achieve their budgeted profit numbers at all costs since the unit may linger around for a full financial year.

Reed's Loan to Buy Offer

The Telegraph is reporting that Reed Elsevier is facing such a problem selling Reed business that they are organizing a consortium to provide funding for a potential purchase. Initially, the company said it would sell the entire division (excluding the Exhibitions Group) then they annouced that they would consider separating the UK and US operations. Outside appearences indicate the sale isn't going quite as well as planned. Ultimately, the division will be sold but Reed may have to give up on their price expectations or consider further break-up scenarios.

If the current approach is succesful it could limit or slow down a potential buyers ability to carve up the company and sell off the pieces they don't want. Any potential buyer is likely to want to sell several properties in an effort to focus the group on a number of core industry segments that have already shown potential for electronic publishing. Any buyer taking advantage of this financing model to be as flexible as if they had negotiated the terms themselves and whether this is possible remains to be seen.