Mead Corp. has agreed to sell its Lexis and Nexis database services for $1.5 billion in cash to Reed Elsevier, a British-Dutch publishing company whose U.S properties include Variety and Publishers Weekly.
The announcement, made late Tuesday, followed nearly five months of bidding for Mead Data Central, Mead's information retrieval subsidiary. Mead put the unit on the block in May, saying it planned to focus on its core business of making paper.
Lexis, the world's largest legal database, and Nexis, one of the biggest news-retrieval services, store and distribute electronic information to more than 300,000 clients. The Nexis service contains the archives of thousands of publications, including the Los Angeles Times.
"This acquisition is a perfect strategic fit for Reed Elsevier," Pierre Vinken, the company's chairman, said in a statement. "Our strategy emphasizes future growth from the English-speaking world, particularly the U.S.A., and expansion in subscription-based publishing serving the professional and business markets."
Mead Data Central last year posted an operating profit of $68 million on $551 million in revenue. In the first eight months of this year, it generated $58 million in operating profit on revenue of $406 million, Reed Elsevier said.
Analysts had projected that the company would sell for anywhere from $700 million to $2 billion. Times Mirror Co., publisher of the Los Angeles Times, was one of the bidders. Toronto-based Thomson Corp. was also in the race.
Reed Elsevier is a joint venture of Reed International, a London-based holding company, and Elsevier of Amsterdam. The company owns Martindale-Hubbell Law Directory and Cahners Publishing, which publishes Variety, the entertainment trade magazine; Publishers Weekly, and Design News.
Mead Corp. Chairman and Chief Executive Steven C. Mason said proceeds of the sale will help the company achieve its goal of increasing shareholder value by concentrating on forest products.
Dayton, Ohio-based Mead is a leading maker of paper, pulp and packaging products. It said it will consider using the funds to buy back some stock, reduce debt, acquire related companies and improve manufacturing facilities.
Some industry analysts had questioned Mead's decision to unload its database services at a time when the world is exhibiting a voracious appetite for on-line information. But others suggested that Mead's services would have eventually lost ground to competitors using newer technologies.
The sale, which is subject to U.S. antitrust review, is expected to close by year-end.
Reed Elsevier said it plans to finance the purchase from surplus cash and $1 billion in further borrowings.