Reed Elsevier (www.reed-elsevier.com) announced its intention to acquire ChoicePoint, Inc. (www.choicepoint.com) during its quarterly earnings call and via a press release dated Feb. 21, 2008. It plans to add the ChoicePoint products to the Risk & Information Analytics subsidiary of LexisNexis (http://risk.lexisnexis.com), which also houses Seisint, acquired by LexisNexis in 2004. This puts ChoicePoint’s AutoTrack under the same LexisNexis arm that houses Accurint. Some press accounts, including Bloomberg, put the acquisition price at $3.5 billion, which reflects the purchase price of $50 per ChoicePoint share. The official press release puts the full price of the acquisition at $4.1 billion, which is the equity price plus the assumption of $600 million in debt. The share offer put a 49% premium on ChoicePoint shares, but they rose rapidly after the announcement. The combined businesses are expected to create a risk management powerhouse with $1.5 billion in revenues. The deal is expected to close in the summer of 2008, assuming shareholder and regulatory approval.
The latter is not a foregone conclusion. Both ChoicePoint and LexisNexis have had problems with the mishandling of personal data. Stolen data, through fraud and theft, have dogged the companies and raised consumer privacy issues, ironic for companies whose products are supposed to help their customers avoid risk, particularly that resulting from fraudulent transactions.
Avoiding Risk Through Public Records
LexisNexis’ Risk & Information Analytics Group uses its public records data to help customers assess risk, authenticate identity, prevent money laundering, screen job applicants, counter insurance fraud, prioritize collections activities, and manage bankruptcy cases.
ChoicePoint, based in Alpharetta, Ga., is a 1997 spinoff from Equifax (www.equifax.com). It gathers personal data from public records sources. Its customers include insurance companies, screening entities, law enforcement, and governments. Its software includes the ability to forecast insurance loss risks, track claims and missed payments, and automate the claims application process. ChoicePoint has also acquired some important analytics technology companies, notably i2 in January 2005 and Optimal Decision Group, an analytics and software company, only at the beginning of February 2008. In a letter to current customers, Don McGuffey, senior vice president and general manager of ChoicePoint Business Services, reassured them of continued product support. He also said the company would continue to be headquartered in the Atlanta area.
Reed Elsevier’s press release stated that the intention is to combine ChoicePoint’s "highly regarded data and analytics assets with LexisNexis’ market leading technology." For those who think of LexisNexis as a content company, this view may be somewhat surprising. Yet Reed Elsevier clearly does not want to define itself as solely about content. It’s about technology and integrating content into workflow.
The acquisition of ChoicePoint could add 5,500 employees to Reed Elsevier, which has already stated that it intends to reduce its headcount by 1,000 due to consolidation in procurement, human resources, and information technology. It will also shrink the number of data centers. Inevitably, however, some jobs will be redundant in the risk management area once ChoicePoint is integrated into LexisNexis. Reed Elsevier estimates the cost of that integration at $200 million, but it expects a costs savings of $150 million by 2011.
Russ Perkins, CEO of Infocommerce (www.infocommercegroup.com), says the acquisition of ChoicePoint "makes perfect sense." He sees the ability of data providers to "deeply embed themselves in the businesses of their customers" as "the Nirvana of the lifetime customer." Outsell’s David Worlock sees the fit as "like a glove" and sees it moving the company "to a better market position."
Walking Away From Publishing
On another front, Reed Elsevier announced that it plans to sell off Reed Business Information (RBI; www.reedbusiness.com), a trade press publisher of more than 200 titles. One of the highest circulation and best known titles is Variety. However, RBI also publishes titles such as New Scientist, Furniture Today, EDN, Computer Weekly, Broadcasting & Cable, Design News, and Australian Doctor. Titles aimed at the library and information world include Publishers Weekly, Library Journal, and School Library Journal. These titles depend upon advertising for much of their revenue. Reed Elsevier cited the cyclical nature of ad sales as the cause for it to step away from RBI. Most of the RBI titles have corresponding websites, and its Zibb (www.zibb.com) business-to-business search engine searches these sites plus related websites, blogs, and directories.
The selling price is estimated at between $2 billion and $2.5 billion. There’s been no indication about whether RBI would sell as a block or be broken up into industry niche products. Nor was a date set for the divestiture. In fact, it might not even be a sale. It could be spun off as a separate business.
What is not being sold is the Exhibitions piece of RBI (www.reedexpo.com). Apparently, conferences have a steady revenue stream, unlike the cyclical nature of ad-supported journals. Reed Elsevier has been heavily criticized, even picketed, over its military defense conferences, and, although Davis was quoted in June 2007 as saying Reed Elsevier would divest those by the end of the year, it has not sold or cancelled them. The latest conference was held in September 2007.
Implications for Info Pros
For information professionals, the news of the ChoicePoint acquisition raised few concerns. A posting to the News Librarians discussion list by Providence Journal’s Linda Henderson that simply announced the acquisition and pointed to the press release garnered no additional comments. Perhaps readers of the list hadn’t made the connection between ChoicePoint and AutoTrack or between LexisNexis’ Risk & Information Analytics Group and Accurint.
Genie Tyburski, law librarian and editor of The Virtual Chase (www.virtualchase.com), worried about the possibility of content changes as the market grows smaller. She believes that AutoTrack and Accurint complement each other, and she would hate to see any move that would combine the content. She also wonders how pricing will be affected, theorizing it could skyrocket.
Independent information professional Lynn Peterson, PFC Information Services, whose business includes background checks, puts a positive spin on the acquisition. Combining two giants, in her opinion, will lead to better vetting of users and help protect privacy rights.
Other librarians wondered about whether the terms and conditions of use would become more restrictive. For those with legitimate reasons to access personal financial and credit data, the concern was about data quality and cost.
It is clear that the acquisition of ChoicePoint and the proposed divestiture of Reed Business signal a strategic change at Reed Elsevier. It moves the company from media to technology. According to Crispin Davis, Reed Elsevier CEO, the company not only intends to enhance its risk management business, but it also favors development of "online workflow solutions." In this scenario, there’s little room for the hundreds of trade press titles. Exiting the print publishing world to concentrate on software, business processes, and technological adaptations of data has serious implications for information professionals. Accustomed to viewing Reed Elsevier in general, and LexisNexis in particular, as research companies, information professionals may have a tough time adjusting to this new strategic focus.