Reed Elsevier CEO Engstrom Says Breakup Is Not on Board Agenda
Reed Elsevier Plc’s chief executive officer said that the owner of the LexisNexis database doesn’t plan to break up its business, after analysts said such a move would increase value.
“I spent a lot of time in the past two months meeting with shareholders” and a breakup “is not something they are asking for or pushing for,” Erik Engstrom said in an interview today. “This is not on the agenda.”
Reed Elsevier may sell individual assets that don’t fit with a strategy to grow organically, Engstrom said. The company has been disposing of trade magazines as print media declines and is focusing on online subscriptions and research products. Reed is “not very acquisitive,” Engstrom said.
First-half profit, adjusted to exclude effects of acquisitions and divestitures, rose 11 percent to 561 million pounds ($868.7 million), Reed said today. Revenue rose to 3.05 billion pounds, compared with the average estimate of 3.02 billion pounds in a Bloomberg survey of eight analysts.
“The results are slightly ahead of expectations and show how resilient Reed is as a group,” said Alex DeGroote, a media analyst at Panmure Gordon & Co.
The shares rose as much as 6 percent, the biggest intraday gain since July 2010, and were up 4.5 percent at 539.5 pence as of 10:29 a.m.
The Anglo-Dutch publisher, which also owns the Gray’s Anatomy textbook line, predicted underlying revenue and profit growth for the year in line with its expectations.
The company, which announced this year it was selling Variety magazine and some Australian titles, said completed and planned disposals will be “mildly dilutive” to earnings per share in the short term. To offset this, proceeds from asset sales will be used to buy back shares this year.
The company ended efforts in 2008 to sell its trade- magazine unit, which once published more than 400 titles, after bids for the business declined amid economic uncertainty. Since then, Reed Elsevier has sold titles piecemeal. Today the division has fewer than 100 titles, Engstrom said.
“We’ve disposed of businesses that in 2008 represented 45 percent of revenue” in the trade magazine unit. This year, Reed Elsevier also sold its Totaljobs jobs website for 110 million pounds to Axel Springer AG.
The company gets half its revenue from the U.S. and about 20 percent from continental Europe, Engstrom said.
A breakup of Reed “could yield a 20 percent to 30 percent increase to the value of the company,” Claudio Aspesi, an analyst at Sanford C. Bernstein, said in a note in February. Investors had been concerned since 2009 about the performance of the U.S. legal research business, he wrote.
To contact the reporter on this story: Kristen Schweizer in London at firstname.lastname@example.org