Reed sells screening business to improve earnings

LONDON Thu Jan 17, 2013 10:29am EST

LONDON Jan 17 (Reuters) - Reed Elsevier said on Thursday it had sold its LexisNexis screening business to a private equity group as part of a move to focus on assets with more predictable earnings and higher margins.

The professional publishing group said it had sold the business, which screens potential employees, to U.S.-based Symphony Technology Group (STG). The news sent the London-listed shares in Reed up 1 percent to 677 pence, their highest level for five years.

The screening business employed about 1,000 people and generated annual revenues of around $180 million, a person familiar with the situation said.

"No price for the disposal has been announced, but we estimate this type of asset would achieve a multiple of 9-10x EV/EBITA and potentially raise up to $300 million for Reed," analysts at UBS said.

"The employee screening unit was a decent asset, but to take it to the next level would have potentially required notably more capital in our view. We think ongoing, proactive optimisation of the portfolio should accelerate growth in the group and enhance margins."

UBS noted that previous disposals had resulted in increased buybacks. The analysts said an incremental $300 million to its ongoing buyback programme would enhance consensus 2013 earnings per share by 0.5 to 1 percent.