Nov. 19 (Bloomberg) -- Offers for Reed Elsevier Plc's trade- magazine unit have fallen to $1 billion, half of original projections, two people with knowledge of the process said.

Chief Executive Officer Crispin Davis will either cancel the sale of Reed Business Information or choose a bidder for final talks in coming weeks, said the people, who asked not to be named because the process is confidential. Davis recently met with two bidders, Bain Capital LLC and a combination of TPG Inc. and DLJ Merchant Banking Partners, to discuss final offers, one of the people said. Both have completed a review of the unit's finances.

Reed Business Information, which publishes film-industry journal Variety, was put up for sale in February, and analysts estimated it would fetch about $2 billion. Bidding has been hampered by the economic slump and frozen debt markets. Reed Elsevier said last week it may be unable to sell the unit in the current climate. The company is selling Reed Business Information to become less dependent on ad revenue and economic swings.

``The whole equation for leveraged business has changed and the cost of financing for venture buyers has gone up and up and up,'' said Simon Lapthorne, a media analyst at Blue Oar Securities in London. ``Reed is now reaching a point of no return in terms of how low they will go with the price.''

Third Bidder?

Apollo Management LP was previously involved in the sale though it's not known whether it remains active in the process and the company hasn't completed commercial due diligence, a third person with knowledge of the deal said.

Reed Elsevier spokesman Tim Haigh declined to comment on the bidding. Representatives from Bain, TPG, DLJ and Apollo declined to comment.

Reed Elsevier shares fell 3.5 pence, or 0.7 percent, to 530 pence at 10:20 a.m. in London trading. The stock has dropped 23 percent this year.

CEO Davis is keen to sell the unit 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.

Bids have dropped as financial markets seized up. Last month, two people with knowledge of the deal said bids had fallen to a range of $1.5 billion to $1.8 billion.

A sale of Reed Business Information may prevent a credit- rating downgrade. Standard & Poor's placed Reed Elsevier's A- rating on review for downgrade after the purchase of ChoicePoint, announced Feb. 21, increased its debt. Selling the trade-magazine unit would help reduce borrowings S&P said at the time.

`Strong Enough'

``In the end, Reed is a strong enough business not to do the deal at the wrong price,'' Lapthorne said. Still, a decision not to sell probably would result in lower credit ratings, he said.

Should a final bidder be chosen, Reed Elsevier may name a winner before Christmas. Financing wouldn't be completed until early next year, two of the people said.

Due diligence on the trade magazine unit was completed in September and doesn't account for more recent effects from the economic crisis, one the people said, adding current sales and forecasts must be reexamined.

Bain Capital and TPG/DLJ would revamp the unit and cut costs, two of the people said. Should the business be sold to a buyout fund, more than $100 million in cost cuts are lined up for the business, including job reductions, one of the people said.

Reed Elsevier, which owns the LexisNexis database, said this week the head of the trade magazine unit, Gerard van de Aast, will leave the job Dec. 15. Van de Aast is leaving the post because he wants to run a Dutch public company and isn't inclined to work for a private-equity owner, said one of the people.

Reed Elsevier offered $330 million in financing to help sell the publishing and information arm earlier this year. Seven banks have said they are willing commit about $900 million in financing, two people with knowledge of the deal said last month.

Lead banks arranging the financing are UBS AG, JPMorgan Chase & Co. and BNP Paribas SA, while the others are Lloyds TSB Group Plc, Royal Bank of Scotland, Calyon and Bank of Ireland.

A UBS spokesman declined to comment on the sale.

To contact the reporter on this story: Kristen Schweizerkschweizer1@bloomberg.net

Last Updated: November 19, 2008 05:46 EST