2nd UPDATE: Reed Terminates Sale Of Business Unit

Reed Elsevier PLC (RUK, ENL) has terminated the sale of its business information unit, which publishes titles like New Scientist, because it couldn't get a high enough price due to the market downturn.

Reed has been trying to sell Reed Business Information (RBI) since February to reduce its reliance on advertiser-funded media and a handful of private equity buyers had been in the running to buy the unit.

But by December, difficult credit markets and falling valuations had more than halved the expected price tag, and ultimately Reed said the terms of the transaction weren't acceptable.

The unit had originally been valued at GBP1.25 billion, but this had fallen to just GBP600 million in November.

And from dozens of expressions of interest in June the bidding field had shrunk by November to two private equity players, TPG Inc. and Bain Capital, before TPG pulled out last week.

Bain declined to comment on Reed's announcement.

The collapse of the sale process means any proceeds from RBI cannot be used to pay down part of the hefty debt Reed racked up with its acquisition of Choicepoint earlier this year.

That acquisition cost $4.1 billion, around half of which will come due in 2010.

But a person familiar with the matter told Dow Jones Newswires that the company plans to issue bonds, most likely in January, to refinance its Choicepoint debt.

The company has repeatedly said the Choicepoint refinancing wasn't dependent on an RBI sale.

UBS said in a note to clients that a number of good credit companies, like British Sky Broadcasting Group PLC (BSY) and British American Tobacco PLC (BTI), have tapped the bond markets recently and while financing costs are likely to rise notably, Reed is confident on refinancing.

This is the second major private equity media deal to fall through in the past months, following on the heals of a failed bid for information group Informa PLC (INF.LN) by Providence Equity Partners Ltd., Carlyle Group and Blackstone Group L.P. (BX) in September.

Both deals have collapsed because credit has become increasingly difficult to come by and the global financial crisis has lowered market valuations.

Numis analyst Paul Richards said he doesn't think the termination of the sale will come as much of a surprise as the potential for the sale to fall through has already largely been discounted.

Reed shares closed down 3.4% at 478 pence.

News Corp. (NWS), which owns roughly 39% of BSkyB, also owns Dow Jones, publisher of this newswire.

Company Web site: www.reed-elsevier.com

-By Kathy Sandler, Dow Jones Newswires; 44-207-842-9293; [e-mail]

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