What next for Reed Elsevier?
Jinfo Blog

14th November 2009

By Tim Buckley Owen

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Reed Elsevier, owner of LexisNexis and Kompass UK, has let its chief executive go after spending only months in the post. Following his resignation ‘by mutual agreement’, Ian Smith is replaced by Erik Engstrom, CEO of science and medical arm Elsevier (http://digbig.com/5baqgs) – with one expert commentator speculating on whether parts of LexisNexis might be spun off to competitors. With a background far removed from Reed Elsevier’s core business (his last job was with builder Taylor Woodrow), Ian Smith was hailed as a ‘seasoned global business leader’ (http://digbig.com/5baqgt). But he arrived at a time of severe difficulties for business-to-business publishing, with Reed Elsevier having to bring its trade magazines arm Reed Business Information back onto its books after failing to find a buyer (http://www.vivavip.com/go/e16562). Following the sale of one RBI division, one analyst suggested that it could herald its break-up (http://www.vivavip.com/go/e21777). Smith then said that he had decided to reverse the decision to sell RBI, which he viewed as a core part of the business (http://www.vivavip.com/go/e22264) – but, as paidContent:UK has since reported, bits of RBI have been sold off nevertheless (http://digbig.com/5baqgw). Announcing interim results last summer, Reed Elsevier acknowledged that terminating the sale of RBI had resulted in its carrying more debt than was ‘prudent’, and that it was raising new equity (realising £0.8bn or $1.35bn) (http://www.vivavip.com/go/e22725). Now in an interim management statement, it says that the professional markets it serves are proving resilient but not immune from late cycle pressures, given the subscription nature of much of the revenue; substantial costs are being taken out of RBI to reflect the lower revenue environment, and LexisNexis has also seen a ‘modest decline’ in its underlying revenues (http://digbig.com/5baqgx). So what next? Writing in Shore Communications’ blog, John Blossom suggests that a possible short term solution could be the disposal of some or all of LexisNexis ‘while its asking price is still worthy’. Either Thomson Reuters or Dow Jones might be suitable candidates, Blossom suggests – although he adds that regulatory concerns about merging LexisNexis into Thomson West would probably make a wholesale spinoff to Thomson Reuters doubtful. More radically, he suggests that these concerns could be overcome by offering LexisNexis’s legal assets to Dow Jones and its news licensing assets to Thomson Reuters, which he says has ‘lacked archives depth’ since it returned Factiva to Dow Jones (http://digbig.com/5baqgy). Thomson Reuters has had its own challenges to face but, reporting its third quarter results, believes that sales of subscription products in its Markets and Legal units have bottomed out and are now starting to improve, while its Tax & Accounting business continues to perform strongly (http://digbig.com/5baqha). Customers of Reed Elsevier, Thomson Reuters and Dow Jones will want to keep a weather eye on developments.

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