Publishing group Reed Elsevier, which takes in titles from Farmers Weekly to the Lancet, is to sell off its underperforming education arm in a move that could raise more than £2bn.
The proceeds will be returned to shareholders and shares in Reed surged 36.5p to a new five-year peak of 641p today on the back of the news.
The group, which has been the subject of persistent private equity bid speculation, said the decision to offload Harcourt Education is part of its strategy to "sharpen its strategic focus".
It aims to concentrate on the growing digital opportunities in its key markets of science and medical, and legal and business publishing. Reporting a 5% increase in underlying pre-tax profits for the group last year to just over £1bn, chief executive Sir Crispin Davis said the "business dynamics" of the education division have increasingly differed from those of its remaining three divisions - Elsevier, LexisNexis and Reed Business - which have been accelerating their online strategies.
Harcourt operates largely in the US, publishing school textbooks and exam papers. The sale of the business "sharpens our strategic focus and concentrates our resources on the digital opportunities across an increasingly synergistic portfolio," Sir Crispin said. Although the results were slightly below some analysts' expectations, the Reed chief executive said the results were "encouraging" with revenue growth in lines with expectations and improved underlying margins. Revenues for the year were up 4% at £5.4bn.
"Going into 2007, market conditions are generally favourable. Our strategy is clear, the business well focused, and we are leveraging our resources to good effect. The digital horizon is expanding and Reed Elsevier is well placed."
Analyst Simon Wallis at Collins Stewart said that although there are two other education business currently on the market - the Dutch Wolters Kluwer business and the Thomson education operation - Reed should be able to raise £1.9bn from the sale. Other analysts suggested the price could exceed £2bn.
Reed has come under fire recently for its involvement in arms fairs. The Joseph Rowntree Charitable Trust sold its £2m stake in the group because it says two subsidiaries, Reed Exhibitions and Spearhead Exhibitions, have continued to organise arms exhibitions despite the charity's three-year campaign to make Reed sever such ties.
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