Reed Elsevier falls on plunging profits and share placing

ANGLO-DUTCH professional publisher Reed Elsevier last night said that it had raised &pound;894m through an equity placing, which it plans to use to pay down its $8.4bn (&pound;5.1bn) debt-pile.<br /><br />Reed unveiled its plans to launch the share placing of up to 9.9 per cent of its market capitalisation yesterday morning.<br /><br />It said its that its acquisition of risk management business ChoicePoint, coupled with its failure to sell off its Reed Business Information unit, had given it &ldquo;more debt than is prudent in current economic conditions&rdquo;.<br /><br />UBS and JP Morgan Cazenove placed 109m new ordinary shares in Reed UK at a price of 405p per share and 63m new ordinary shares in Reed NV, its Dutch listed entity, at &euro;7.08 (600p) per share. Both prices were at a near three per cent discount to last night&rsquo;s closing prices.<br /><br />The Lancet publisher&rsquo;s new chief executive, Ian Smith, said that the deal would address the firm&rsquo;s &ldquo;stretched credit metrics&rdquo;.<br /><br />Meanwhile, Reed said that revenues from continuing operations rose three per cent at constant currencies in the first-half, to &pound;3.06bn, broadly in-line with consensus.<br /><br />But pre-tax profits fell 52 per cent to &pound;188m in the period, forcing it to ditch its 2009 guidance for a rise in adjusted earnings per share.<br /><br />Smith said that there were inevitable job losses and asset sales on the horizon but that the firm would invest in online businesses.<br /><br />Its shares closed down by over 12 per cent at 420p.<br /><br /><strong>PHIL SHELLEY<br />CO-HEAD,<br />CORPORATE BANKING, UBS</strong><br />JP Morgan Cazenove and UBS acted as joint bookrunners to Reed Elsevier in respect of the placings, while RBS Hoare Govett was joint lead manager and ABN Amro was the listing agent in the Netherlands.<br /><br />The UBS team was led by Phil Shelley, the investment bank&rsquo;s co-head of corporate banking, who has been with the company since 1995.<br /><br />Shelley has been involved in several high profile fundraisings so far this year, including building supplies merchant Wolseley&rsquo;s &pound;1bn rights issue and share placing in April.<br /><br />The JP Morgan Cazenove team included Andrew Hodgkin and Jonathan Wilcox.<br /><br />The placement was carried out using a so-called &ldquo;cash-box&rdquo; structure, which allowed the company to raise money by placing up to 10 per cent of its share capital in new shares, whilst avoiding the time-consuming process of offering all existing shareholders pre-emption rights.<br /><br />This means that the company can address its stretched &ldquo;credit metrics&rdquo; sooner rather than later.<br />