Mead Will Sell Its Lexis/Nexis On-Line Unit : Data: The subsidiary could draw bids of up to $1 billion. Parent company wants to focus on core forest products.
Taking advantage of the frenzied appetite for on-line information, Mead Corp. put its Lexis and Nexis database services on the block Monday and said it intends to focus on its core business of forest products.
Investment analysts applauded the action, saying Mead had picked a good time to wrest strong value from a profitable venture, since competition in the field is heating up. They projected that Mead Data Central, the on-line service subsidiary, would draw bids of at least $1 billion.
Mead has hired Goldman, Sachs & Co., a Wall Street investment firm, to evaluate how best to sell off the unit. Officials did not rule out a spinoff, but indicated that the logical step would be a sale to a “strategic buyer.”
“This is the ideal time to unlock the value of the Lexis/Nexis franchise for the benefit of our share owners,” said Steven C. Mason, chairman and chief executive of Mead, based in Dayton, Ohio.
Mead, a leading maker of paper, pulp and packaging products, was founded in 1846. It began its unlikely foray into the electronic information business in 1968, when it paid $6 million for the company that would become Mead Data Central. For 1993, the unit posted earnings of $50.4 million on sales of $551 million. The previous year, it made $50.6 million on sales of $495 million. The unit accounts for about 10% of Mead’s business.
Mead Data Central’s databases contain millions of legal and business documents and newspaper and magazine reports, retrieved by more than 300,000 clients over computers. Lexis, the more widely used of the two main services, is the legal research operation. Nexis provides general and business news.
Lexis/Nexis subscribers include law firms, courts, schools, accounting and public relations firms, corporations, brokerage houses and news organizations.
Industry observers said they expect potential buyers to queue up. “I’m sure right now there’s a lot of salivating going on,” said Maureen Fleming, editor of Information Industry Bulletin, a newsletter in Stamford, Conn.
Among possible suitors, she mentioned University Microfilms Inc. of Ann Arbor, Mich.; Dow Jones News Retrieval, owned by the publisher of the Wall Street Journal; Dialog, a general, scientific and technical on-line service owned by Knight-Ridder, the newspaper company; Information Access Co., owned by Ziff-Davis Corp.; West Publishing Co., Mead’s chief rival in the legal research field; Thomson Corp., a Canadian publishing company; Time Warner, owner of American Lawyer Group, and Times Mirror Co., publisher of The Los Angeles Times.
One organization with a big stake in the outcome is the New York Times, which years ago granted Nexis the exclusive right to purvey its articles. As a result, the newspaper has been precluded from arranging lucrative contracts with other on-line services, such as America Online and Prodigy. But Fleming said she doubted that the New York Times would be inclined to pay the premium needed to buy Nexis and “get its rights back.” The paper had no comment.
A Mead spokeswoman said the company decided to focus on forest products, an industry that has struggled in recent years, because “we’re anticipating an up-cycle in the business again.”
Mead shares rose $1.25 on Monday, to close at $44.50 in New York Stock Exchange trading.
