Reed merges with Dutch giant

Folio: The Magazine for Magazine Management, Nov 15, 1997 by Neil Cassidy, Jeff Garigliano

In a mammoth merger, Reed Elsevier announced it would join with Dutch rival Wolters Kluwer to form an international publishing juggernaut with more than $7 billion in annual sales. The new company, to be called Elsevier Wolters Kluwer, will employ 42,000 people and have a market capitalization of 00 about $28.3 billion. While Reed Elsevier has a solid position in scientific publishing, Wolters Kluwer focuses on taxation and legal publishing. "It's a perfect fit," Wolters chairman Cor Brakel, who will head the merged company, told Reuters.

Within the new structure, Reed shareholders will control 38.3 percent, Elsevier shareholders will control 34.2 percent and Wolters Klower shareholders, 27.5 percent. (Domestically, Reed Elsevier is traded as two separate issues on the New York Stock Exchange--Reed International under ticker symbol RUK, and Elsevier under ENL.) Shares of all three companies rose when the merger was announced. About 40 percent of the new entity's revenues will come from North American operations, with other major holdings in Europe and Asia. The move is still subject to regulatory approval by U.S. regulatory agencies and by the European Union, which could pose more of a hurdle, given that the new company will have close to a European monopoly in several publishing sectors.

In the days following the announcement, Reed said in a statement that it's hoping to save about $81 million in overlapped costs within three years of the merger. This represents just 1 percent of the overall cost base of about $7 billion, but the company says it expects to find other places to trim costs.

Merger creates job cuts

In other Reed developments, the company is still dovetailing its Chilton acquisition with Cahners Publishing, its major U.S. trade publishing division. Most recently, the company announced that it would cut about 100 jobs, sell nine magazine and research units, and reorganize several publishing divisions. The nine properties now on the block include Chilton Research Services, a major operation serving Fortune 300 companies, and the Business Research Group, plus seven titles: CabinetMaker, Cheese Market News, Dairy Foods; Furniture Design & Manufacturing; Instrumentation & Control Systems; Home Improvement Market and Upholster, Design & Manufacturing. Spokeswoman Margaret Pantridge I says that these are in addition to the four computer magazines--Government Computer News, Government Computer News State & Local, Datamation and Reseller Management-Reed decided in October to sell.

The divestments and the Cahners-Chilton merger in general will cost 100 people their jobs. Fifty-five employees in the 4,400-employee unit, now called Reed Elsevier Business Information, were told in early October that their positions were being eliminated, including 40 circulation staffers in the former Chilton's base in Radnor, Pennsylvania. The other 45 terminations will happen over the next 15 months, Pantridge says. She adds that given the new unit's size, "there wasn't much overlap"--with the exception of one category it wants to focus less attention on: computers.

Pantridge says the realignment establishes three magazine divisions the 39-title manufacturing/new-product unit; entertainment, communications and media, headed by executive vp Mark Lieberman, who'll oversee Variety, Broadcasting & Cable, Publishers Weekly, and 18 other publications; and the 59-title business publications division, headed by executive vice president Brian Nairn.

The entire management team will report to CEO/president Bruce garnet, based in Newton, Massachusetts.