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Reed Elsevier and Wolters Kluwer Call Off Merger
Jean Richardson &Jim Milliot -- 3/16/98
The proposed merger between the Anglo-Dutch publishing group Reed Elsevier and Wolters Kluwer of The Netherlands has been called off after it emerged that the European regulators were planning to raise objections.
The merger, announced last October (News, Oct. 20, 1997), would have created a £20-billion ($34 billion) company with sales of nearly $9 billion that would have dominated the fields of law, tax and medical publishing. The European Commission, however, had received complaints from academics and competitors, who feared that the merger would result in a virtual monopoly of law and tax publishing, and it was set to insist that some titles -- mostly from the Wolters Kluwer list -- would have to be sold off. As a result, Wolters wanted to renegotiate terms to protect the interests of its shareholders, thus making the merger much less attractive to Reed Elsevier.
Commenting on the decision, Nigel Stapleton, co-chairman of Reed Elsevier, said that the deal, though highly desirable, was not vital to either party. "We are getting back to business as usual, and neither side is in any way damaged." The stock of both companies declined on the news.
Although the merger was scuttled because of the demands of the European Commission, the failed deal will have ramifactions on U.S. publishing. If the merger had gone through, the ranks of legal and tax publishers with revenues of more than $1 billion would have shrunk from three (Reed, Wolters Kluwer and Thomson) to only two. As one analyst noted, "When you're talking about combining Reed's Lexis-Nexis with Kluwer's CCH, you're looking at a powerful operation."
With the deal canceled, the two companies are free to pursue other companies, and, in fact, Wolters Kluwer was making acquisitions while the Reed deal was pending. WK acquired Thomson Science from The Thomson Corp. late last year and has reached an agreement in principle to acquire Waverly Inc. That deal, however, is running into scrutiny from the Justice Department, which earlier this month asked for additional information on the proposed acquisition. The failure of the Reed deal, however, may help the Waverly deal to go through, as WK's share of the medical market will be less without the Reed properties.
WK and Reed can also now be considered potential buyers for Times Mirror's Bender and Mosby operations, which have been on the block for several months. In addition, London analysts are suggesting Reuters or Pearson as possible suitors for Reed.
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