Dec. 10 (Bloomberg) -- Reed Elsevier Plc, publisher of Variety and New Scientist, ended efforts to sell its trade- magazine unit after bids for the business declined amid a slumping economy and frozen credit markets.

Reed Elsevier will try to sell Reed Business Information again “in the medium term,” when conditions are more favorable, the London-based company said in a statement today. The unit produces more than 400 publications, including film-industry journal Variety and U.K. property publication Estates Gazette.

Chief Executive Officer Crispin Davis planned to sell the unit to make Reed Elsevier less dependent on ad sales and swings in the economy, while using the proceeds to repay debt and safeguard its credit rating. One of three bidders dropped out last weekend, according to two people familiar with the process.

“Let’s be honest, these are tough markets and the price being proposed was just too low,” said Alex De Groote, an analyst at Panmure Gordon & Co. in London. “This was the only deal anywhere and it was almost bizarre it was still going on in this economy.”

Offers for the unit fell to $1 billion, half of original projections, people familiar with the deal said Nov. 19.

Reed Elsevier, which also owns the LexisNexis database, fell 16.75 pence, or 3.4 percent, to 478 pence in London, bringing the slide this year to 39 percent.

Three Bidders

Bidders for the Reed Elsevier unit included Bain Capital LLC, a combination of TPG Inc. and DLJ Merchant Banking Partners, and Apollo Management LP. TPG dropped out this past weekend, said two people familiar with the bidding who asked not to be named because the plans were confidential.

Private-equity firms, which have raised record funds in the past two years, have struggled to finance acquisitions after the collapse of the U.S. subprime mortgage market last year roiled credit markets worldwide.

Buyout firms have announced $201 billion of takeovers worldwide this year, less than a third of the total in the same period a year earlier, according to data compiled by Bloomberg.

“Overall, we can understand the disappointment of the market, but this is not a disaster,” Paul Richards, an analyst at Numis Securities in London, said in an e-mailed comment. “We are firmly of the view that the business will recover in value over the medium term” because it has “world class brands.”

CEO Davis has been keen to sell the trade magazine business before he retires in March, analysts have said. On Nov. 4, Reed Elsevier named Ian Smith, the former head of homebuilder Taylor Woodrow Plc, to succeed Davis.

Repaying Debt

“The RBI disposal process has been in trouble for some time, so the news is largely discounted by the market,” Richards at Numis said. “Reed’s balance sheet can take the strain of not managing a disposal.”

Reed Elsevier planned to use proceeds from selling the unit to repay debt on its $3.5 billion purchase of ChoicePoint Inc., a provider of data services to the insurance industry.

Standard & Poor’s had placed the company’s A- rating on review for a downgrade citing increased debt from the purchase. The sale of the trade-magazine unit would help reduce the amount of debt, S&P said at the time.

Fitch Ratings, which views Reed Elsevier A- with a negative outlook, will keep its assessment unchanged, said Alex Griffiths, a media analyst with the ratings company.

“There was the potential they wouldn’t sell the business and that’s something we have considered,” Griffiths said. “This is a solid business and will contribute to paying down the debt and reducing financial leverage.”

Had the magazine unit been sold, Fitch would have maintained its A- rating and upgraded its outlook to stable, he said.

“If it issues term debt or extends its bank lines, thus addressing 2010 debt maturities, and Fitch’s expectations for performance and debt paydown in 2009 are met, we are likely to stabilize the ratings at A-,” Griffiths said. “If it fails to do so it could lead to negative action.”

To contact the reporter on this story: Kristen Schweizer in London at kschweizer1@bloomberg.net

Last Updated: December 10, 2008 12:34 EST