21st Feb 2008 07:01
Reed Elsevier PLC21 February 2008 Issued on behalf of Reed Elsevier PLC and Reed Elsevier NV 7.00am (GMT) 21 February 2008 Reed Elsevier to acquire ChoicePoint, Inc Significant expansion in fast growing risk information and data analytics sector Reed Elsevier to acquire ChoicePoint for a total cost of $4.1 billion (£2.1billion/€2.8 billion) payable in cash. This comprises an equity value of $3.5billion and the assumption of $0.6 billion of net debt. O Combination of ChoicePoint with the LexisNexis Risk Information and Analytics Group will create a risk management business with $1.5 billion in revenues and a leading position in the fast growing risk management marketplace. O ChoicePoint has a leading position in providing unique data and analytics to the attractive insurance sector (over 50% of Choicepoint's $982 million revenue and 80% of its business operating income from continuing operations in 2007) and highly complementary products and new capabilities in the screening, authentication and public records areas. O The combination of ChoicePoint's highly regarded data and analytics assets with LexisNexis's market leading technology can be leveraged to create greater opportunities in addressing the growing risk information and analytics needs in insurance, financial, legal, screening, law enforcement, public safety, healthcare and other sectors. O The combination will improve top line growth and deliver considerable synergy benefits through the application of powerful technology, increased scale and integration of resources. O The acquisition will accelerate Reed Elsevier's revenue and profit growth; is accretive to adjusted earnings from the first year; and is expected to deliver a post-tax return on capital in excess of Reed Elsevier's cost of capital by the third year, with returns continuing to climb thereafter. O The acquisition significantly enhances Reed Elsevier's portfolio through expansion in these attractive long term growth markets, and accelerates Reed Elsevier's progress in providing online solutions embedded into customer workflows. O Consideration of $50 per share in cash; unanimous recommendation of the ChoicePoint board; subject to ChoicePoint shareholder and regulatory approvals. Acquisition to be financed from committed new bank facilities. Commenting on the proposed transaction, Sir Crispin Davis, Reed Elsevier's ChiefExecutive Officer, said: "The acquisition of ChoicePoint represents a major further step in the buildingof our risk management business and in the development of Reed Elsevier's onlineworkflow solutions strategy. The market growth in risk information andanalytics is highly attractive and ChoicePoint brings important assets andmarket positions that fit well with our existing business and, in combination,can be leveraged to very good effect. ChoicePoint's insurance business in particular has seen strong consistentgrowth, and through the combination of ChoicePoint's highly regarded data andanalytics assets and our leading LexisNexis risk technology, we can furtherdevelop compelling offerings for customers and realise significant synergybenefits." Enquiries: Investors: Sybella Stanley, Director of Corporate Finance+44 (0)20 7166 5630 Media: Patrick Kerr, Director of Communications+44 (0)20 7166 5646 Cautionary Statement Regarding Forward-Looking Statements Certain statements in this announcement may constitute "forward-lookingstatements" within the meaning of the US Securities Act of 1933, as amended, andthe US Securities Exchange Act of 1934, as amended. These statements aresubject to a number of risks and uncertainties and actual results, and eventscould differ materially from those currently being anticipated as reflected insuch forward-looking statements. The factors that could cause actual resultsand events to differ materially include the following: the possibility that theparties may be unable to achieve expected synergies and operating efficienciesin the merger within the expected time-frames or at all and to successfullyintegrate ChoicePoint's operations into those of Reed Elsevier; such integrationmay be more difficult, time-consuming or costly than expected; revenuesfollowing the transaction may be lower than expected; operating costs, customerloss and business disruption (including, without limitation, difficulties inmaintaining relationships with employees, customers, clients or suppliers) maybe greater than expected following the transaction; the conditions to thecompletion of the transaction may not be satisfied, or the regulatory approvalsrequired for the transaction may not be obtained on the terms expected or on theanticipated schedule; and the parties' ability to meet expectations regardingthe timing, completion and accounting and tax treatments of the merger; ReedElsevier and ChoicePoint are subject to the actions of competitors; exchangerate fluctuations; customers acceptance of our products and services; acts ofwar and terrorism may adversely affect our business; the volatility of theinternational marketplace; and the other factors discussed in our annual reportsand filings with the US Securities and Exchange Commission., which are availableat http://www.sec.gov. Reed Elsevier assumes no obligation to update theinformation in this announcement, except as otherwise required by law. Readersare cautioned not to place undue reliance on these forward-looking statementsthat speak only as of the date hereof. Additional Information and Where to Find It In connection with the proposed acquisition, ChoicePoint will file relevantmaterials with the US Securities and Exchange Commission, includingChoicePoint's proxy statement on Schedule 14A. STOCKHOLDERS OF CHOICEPOINT AREURGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE US SECURITIES AND EXCHANGECOMMISSION, INCLUDING CHOICEPOINT'S PROXY STATEMENT, BECAUSE THEY WILL CONTAINIMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and securityholders will be able to obtain the documents free of charge at the US Securitiesand Exchange Commission's web site, http://www.sec.gov, and ChoicePointstockholders will receive information at an appropriate time on how to obtaintransaction-related documents for free from ChoicePoint. Such documents are notcurrently available. Transaction Reed Elsevier Group plc announced today that it has entered into a definitivemerger agreement with ChoicePoint (NYSE: CPS) to acquire the company. Under theterms of the agreement, ChoicePoint shareholders will receive $50 in cash foreach share of common stock, valuing the equity of the company at $3.5 billion(£1.8 billion/€2.4 billion). The ChoicePoint board will convene a meeting ofChoicePoint shareholders to approve the merger and is unanimous in itsrecommendation of the merger. Taking into account $0.6 billion of estimated netdebt, the total value of the transaction is $4.1 billion. In the year ended 31 December 2007, ChoicePoint's continuing operations hadrevenues of $982 million, ebitda (earnings before interest, taxes, depreciationand amortisation) of $287 million, and operating income (before goodwill andasset write downs) of $223 million. At 31 December 2007, gross assets were$1,215 million and net assets $900 million before corporate net debt of $590million. The merger is subject to customary regulatory approvals and is expected to becompleted later in the year. The transaction will be financed initially throughcommitted new bank facilities, to be later refinanced through the issuance ofterm debt securities. Strategy The acquisition of ChoicePoint, and its combination with the very successfulLexisNexis Risk Information and Analytics Group ("RIAG"), creates for ReedElsevier a position as a world leading provider of risk information andanalytics by adding a major presence in the insurance segment and complementaryproducts and new capabilities in the screening, authentication and publicrecords areas. The acquisition will accelerate Reed Elsevier's growth and, through thecombination of ChoicePoint's highly regarded data and analytics assets andRIAG's market leading technology infrastructure, will provide the opportunity todevelop more compelling products for the market and considerable synergybenefits. ChoicePoint provides unique information and analytics to support underwritingdecisions within the property and casualty insurance sector; screening andauthentication services for employment, real estate leasing and customerenrolment; and public information solutions primarily to banking, professionalservices and government customers. Whilst the ChoicePoint business reportedmodest revenue growth of 2% in 2007, the Insurance Services business, whichgenerates over 50% of its revenues and over 80% of business operating income ona continuing basis, reported organic revenue growth of 10% and operating marginsof 51%. We expect continued strong growth in the insurance sector andsignificantly improved performances in the other businesses. These otherbusinesses are in sectors where RIAG operates and is performing very strongly,with consistent delivery of double digit revenue growth, aided by the LexisNexisrisk technology acquired with Seisint. This experience is encouraging. The acquisition of ChoicePoint meets all of Reed Elsevier's acquisitionfinancial criteria: it is expected to accelerate Reed Elsevier's revenue andprofit growth; be marginally accretive to earnings in the first year ofownership with significant earnings enhancement thereafter; have a post taxreturn on capital in excess of Reed Elsevier's WACC in the third year ofownership; and add substantial net present value. RIAG has been one of the fastest growing areas of Reed Elsevier for a number ofyears and a key area of strategic focus, reflecting the strong growth in demandfor information and analytics solutions in risk management markets which areshowing consistent overall market growth in the 7-9% range. The acquisition ofSeisint in 2004 represented a landmark in the development of RIAG, addingcompelling scaleable technology and analytics capabilities. The group todayoffers business and non-profit customers the fastest and most powerful dataretrieval and scoring and analytics capability available in its markets. RIAGrevenues are now in excess of $500 million, growing consistently at double digitrates, significantly ahead of the market, with strong operational gearing andmargin growth. The integration of Reed Elsevier and ChoicePoint's businesses is expected torealise operational synergies and economies of scale that will deliver costsavings of over $150 million by the third year following acquisition. Costs ofacquisition integration restructuring are expected to be approximately $200million. Proforma net borrowings of the combined Reed Elsevier and ChoicePoint as at 31December 2007, and after taking into account the special distribution to ReedElsevier shareholders in January 2008 of £2.0 billion/€2.7 billion from the netproceeds of the disposal of the Harcourt Education division, would have been£3.1 billion/€4.0 billion. ChoicePoint businesses In the year to 31 December 2007, the ChoicePoint continuing operations reportedthrough three principal business segments: Insurance Services (2007 revenues $506 million; operating income $258 million) The Insurance Services group is ChoicePoint's largest business and providesdata, analytics, software and business information services to property andcasualty (P&C) personal and commercial insurance carriers. ChoicePoint'sinformation solutions help insurers effectively assess risks in the underwritingprocess to ensure that their customers receive appropriate policy pricing. Inpersonal lines, ChoicePoint's CLUE (comprehensive loss underwriting exchange)database is the industry's most complete source of historical claims data.Other tools include Current Carrier, which identifies the existence of currentor previous insurance, as well as any possible lapses in coverage. The Insuritybusiness unit provides software, data and analytics to P&C commercial andpersonal lines carriers to improve risk acceptance and loss mitigation. The Insurance Services group reported 11% revenue growth in 2007, or 10% beforeacquisitions, and operating margins of 51%. The division has shown significantgrowth over many years reflecting the growth in demand for underwriting decisionsupport and the increasing sophistication of underwriting pricing decisions.ChoicePoint's unique data and analytics form an essential part of the assessmentof customer risk profiles in the underwriting process and are integrated intoits customers workflows, and provides the platform for introducing additionalofferings to enhance customer effectiveness. Screening & Authentication Services (2007 revenues $253 million; operatingincome $47 million) The screening and authentication services group provides background screeningand identity verification products focused on pre and post employment screening,tenant screening, vital records and customer enrolment. In 2007, the Screening & Authentication business saw a 2% reduction in revenuesreflecting declines in the pre employment screening business due to hiringtrends in major employers particularly in the retail sector. The annual growthrate of the workplace solutions business has however averaged 7% over the lastten years and the 2007 performance masks strong performances in other Screeningand Authentication areas. "Know your customer" and other customer and employeeidentity services are growing rapidly in the financial services market and otherregulated sectors, as also evidenced by the strong growth of over 20% a year inLexisNexis's similar screening services. This, together with expansion in thelargely untapped area of the mid-sized company market, is expected to drive goodlong term growth as hiring trends stabilise. Business Services (2007 revenues $142 million; operating income $7 million) The Business Services group provides public information solutions primarily tobanking, professional services and government customers. These services helpcompanies with risk management, enhanced due diligence, verification andbusiness credentialing, and allow companies to better mitigate financial andreputational risk and improve their processes and productivity. Business Services declined 2% in 2007 as the business was repositioned andcustomers recredentialled. The business is highly complementary to RIAG whichoperates in the same sectors and is delivering strong double digit growth andgood operational gearing, aided by the LexisNexis risk technology acquired withSeisint. A significant improvement in performance is expected from thecombining of ChoicePoint assets and customer relationships with LexisNexistechnology. Additionally, the Marketing Services group (2007 revenues $81 million; operatingincome $2 million before goodwill and asset write downs) provides directmarketing and database solutions primarily to the insurance and financialservices industries. Corporate costs, shared services and share basedremuneration amounted to $90 million in 2007. The figures in relation to the ChoicePoint businesses above and elsewhere inthis document are derived from ChoicePoint's published and other financialinformation and have been prepared under ChoicePoint's accounting policies. Morgan Stanley has acted as lead adviser on the acquisition of ChoicePoint. UBSand JP Morgan Cazenove have acted as brokers and have also provided financialadvice to Reed Elsevier. Financing has been arranged with these three banks. Notes to Editors: About Reed Elsevier Reed Elsevier Group plc is a world leading publisher and information provider.It is owned equally by its two parent companies, Reed Elsevier PLC and ReedElsevier NV. The parent companies are listed on the London, Amsterdam and NewYork Stock Exchanges, under the following ticker symbols: London: REL;Amsterdam: REN; New York: RUK and ENL. In 2007, Reed Elsevier had revenues fromits continuing operations of £4.6bn. The group employs 32,000 people, includingapproximately 16,000 in North America. Operating in the scientific, medical,legal, risk and business-to-business sectors, Reed Elsevier provides high valueand flexible information solutions to professional end users, with increasingemphasis on internet delivery. About ChoicePoint ChoicePoint (NYSE: CPS) was founded in 1997 in a spin-off from Equifax, theUS-based credit bureau. In the company's decade of operation, annual revenuegrew from approximately $400 million (USD) to approximately $1 billion (USD).ChoicePoint provides businesses, government agencies and non-profitorganisations with technology, software, information and marketing services tohelp manage economic and physical risks as well as identify businessopportunities. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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