Reed Elsevier announced today its intention to sell off a significant portion of its Reed Business Information-US division. Variety is among the titles it will retain; others that RBI-US intends to keep are Reed Construction Data US & Canada, RS Means, Marketcast, LA411 and Buyerzone.
Tad Smith, CEO of RBI-US, also announced his resignation today to pursue a new job challenge.
RBI CFO John Poulin has been appointed acting CEO for RBI-US and will report to Global RBI CEO Keith Jones, effective immediately. Those businesses being sold, which include Publishers Weekly, Video Business and Broadcasting & Cable, now report to Jeff DeBalko, who is president of the RBI-US Business Media Division as well as the company’s chief internet officer.
“This has been a difficult decision to reach as there are many strong brands here, with very experienced and professional teams running them, but we have concluded that they are less well suited to RBI’s strategy going forward,” said Jones. “We have decided to focus our efforts and investments on a narrower range of brands and markets. We have to contend with a far harsher advertising environment than any of us have experienced before and, in such a climate, we have to focus not just on innovation and efficiency, but also on ensuring that our portfolio is well-matched with our long-term ambitions.
“I believe we have all the ingredients to build a world-class B2B media company, with online products and services providing an increasingly important revenue stream, where we engage more closely with our customers, meeting the evolving needs of users and advertisers with some of the very best brands in B2B media; and all of this underpinned by the most creative and dedicated people in the industry.”
This news came on the heels of Reed Elsevier’s announcing results for the first half of 2009 and that, in an effort to reduce debt and improve credit metrics, it intends to place and sell shares of Reed Elsevier PLC and Reed Elsevier NV representing up to 9.9% of the total company.
The net proceeds of the placings would be used to reduce Reed Elsevier’s net debt, including paying down the remaining debt facility arising from the acquisition of ChoicePoint completed in September 2008. This will ensure that Reed Elsevier maintains solid investment-grade credit metrics in the current economic environment and leave Reed Elsevier appropriately resourced to support its market and product strategies.
The first-half results included revenues up 3% and adjusted operating profits up 5%, with corporate restructuring on track to deliver $350 million in annual costs savings by 2011. Reed Elsevier also shows strong cash flow.
However, Reed Exhibitions and RBI, which currently comprise 20% of Reed Elsevier’s adjusted operating profits, have been impacted as customers cut back on marketing and advertising.
Although Reed Elsevier feels it is “overall well placed in continuing tough environment,” the “outlook remains challenging” as it expects advertising and promotion markets will continue to be impacted by recession.
“This robust set of first half results demonstrates the quality of the majority of our business in tough economic conditions,” said Reed Elsevier chairman Anthony Habgood. “Our priorities are to manage through this environment whilst developing strategies to emerge from this recession stronger and with greater focus on growing products and markets.”
“I am convinced that there is a bigger prize for our customers, employees and our shareholders by accelerating investment and stepping up our organic growth development,” said Reed Elsevier CEO Ian Smith. “Despite the global recession, I believe that now is the right time to develop more aggressive market and product strategies to capture the market opportunities and increase competitive differentiation.”
In 2008, Reed Elsevier completed the sale of its education businesses and returned the net proceeds of $4 billion to shareholders. This was followed by the acquisition of ChoicePoint for $4.1 billion. Reed Elsevier originally intended to fund the acquisition partly through the sale of Reed Business Information; as announced last December, Reed Elsevier canceled the plan in light of poor credit market conditions and the deteriorating economic outlook.
Instead, Reed Elsevier funded the ChoicePoint purchase through a $4.2 billion acquisition debt facility; $3.2 billion has been repaid through the issuance of $2.8 billion of term debt in early 2009, with maturities ranging from 4 to 10 years as well as with cash generated from operations. However, total net debt at the end of June 2009 amounted to $8.4 billion and the combined net debt to EBITDA ratio is currently approximately 3.6 times, significantly higher than Reed Elsevier’s target range of 2-3 times.
The placings are being conducted through J.P. Morgan Cazenove Limited and UBS Limited. RBS Hoare Govett Limited is acting as Joint Lead Manager to the Placings and ABN AMRO Bank N.V. as listing agent in the Netherlands. Pricing and the final number of shares to be placed have yet to be determined.