Feb. 21 (Bloomberg) -- Reed Elsevier Plc, owner of the LexisNexis database, agreed to buy ChoicePoint Inc. of the U.S. for $3.5 billion to add information services for the insurance industry.

Reed Elsevier will pay $50 a share in cash, 49 percent more than ChoicePoint's closing price yesterday in New York Stock Exchange trading, London-based Reed Elsevier said in a statement today. Reed Elsevier will assume about $600 million of net debt, according to the statement. Reed Elsevier said it will sell its Reed Business Information unit, which publishes 135 trade magazines including New Scientist and Australian Doctor.

Combining Alpharetta, Georgia-based ChoicePoint with the LexisNexis Risk Information and Analytics Group will create a risk-management business with $1.5 billion in revenue, Reed Elsevier said. The company also said 2007 net income rose to 1.2 billion pounds from 623 million pounds a year earlier.

``The acquisition of ChoicePoint represents a major further step in the building of our risk management business,'' Reed Elsevier Chief Executive Officer Crispin Davis said in the statement. ``The market growth in risk information and analytics is highly attractive and ChoicePoint brings important assets and market positions that fit well with our existing business.''

Reed Elsevier shares rose 23 pence, or 3.9 percent, to 607 pence as of 8:15 a.m. in London. The stock has fallen 4.1 percent in the past year.

Sales Drop

Sales dropped to 4.58 billion pounds in 2007 from 5.4 billion pounds a year earlier after Reed Elsevier sold its education division. Adjusted earnings per share rose to 35.9 pence from 33.6 pence a year earlier, beating the median estimate of seven analysts surveyed by Bloomberg News for 35.1 pence.

Reed Elsevier said the purchase will accelerate revenue and profit growth, will add to adjusted earnings starting in the first year and will deliver an after-tax return on capital in excess of the cost of capital by the third year, ``with returns continuing to climb thereafter,'' the company said.

Reed Elsevier, which publishes magazines, stages exhibitions and provides professional information, has expanded its online products and reduced editorial and purchasing costs. The company said today it will begin a new cost-cutting plan, with a goal of saving 245 million pounds from 2008 to 2011. Annual savings will reach 100 million pounds by 2011, and the plan will lead to ``exceptional costs'' of 140 million pounds, the company said.

Equifax Spinoff

ChoicePoint, which has 5,500 employees, was spun off in August 1997 from Equifax Inc., a consumer-credit reporting company based in Atlanta. ChoicePoint had net income of $32.4 million in 2007 on sales of $981.9 million.

The combination will generate cost savings of more than $150 million by the third year after the acquisition, Reed said. Costs related to the integration are forecast to be about $200 million, the company said.

The transaction will initially be financed through new bank facilities, and later refinanced through the sale of debt, Reed said.

Reed Business depends on advertising revenue and tracks the ups and downs of the economy, while the company is trying to move to more subscription-based businesses, Reed Elsevier said.

To contact the reporter on this story: Simon Thiel in London at sthiel1@bloomberg.net

Last Updated: February 21, 2008 03:29 EST