Publisher Reed Elsevier plans to integrate ChoicePoint with its LexisNexis Risk Information and Analytics Group to create a risk management business with $1.5 billion in revenues.
More than 50% of ChoicePoint's $982 million revenue and 80% of its business operating income from continuing operations in 2007 came from insurance sector. It said earlier this month that it had further boosted its insurance industry focus with the acquisition of Australian firm Optimal Decisions Group (ODG), which specialises in advanced analytics and software for the insurance industry.
In a statement, Reed Elsevier says the combination of ChoicePoint's data and analytics assets with LexisNexis technology will create greater opportunities in addressing the growing risk information and analytics needs in insurance, financial, legal, screening, law enforcement, public safety, healthcare and other sectors.
The all-cash deal, which will be funded by $600 million in new debt, is expected to be accretive to adjusted earnings from the first year. It is expected to deliver a post-tax return on capital in excess of Reed Elsevier's cost of capital by the third year, with returns continuing to climb thereafter.
The deal has received unanimous recommendation of the ChoicePoint board, but is subject to ChoicePoint shareholder and regulatory approvals.
Separately, Reed Elsevier disclosed plans to divest its Reed Business Information division and says it will be looking at various options in the coming months.