London - Reed Elsevier PLC, a London-based publisher and parent of the LexisNexis information service, will spend $3.6 billion cash for ChoicePoint Inc., a 1997 offshoot of Equifax, the companies report. The acquisition is subject to ChoicePoint shareholder and regulatory approval, is expected to close in the summer of 2008.
The deal has far-reaching implications for the insurance industry. ChoicePoint, which collects, sells access to and analyzes consumers' personal information, provides data and analytics to insurers of all sizes.
As reported by the Associated Press, Jim Peck, the chief of LexisNexis' risk group, said LexisNexis was particularly interested in ChoicePoint's insurance sector business, but could not confirm which of the two companies’ services would be divested.
Reed plans to combine ChoicePoint with its Lexis Nexis information service to create a risk-analytics business. The combined group will remain based at ChoicePoint's headquarters in Alpharetta, Ga., though a new name for the soon-to-be-formed company has yet to be determined. A company spokesperson admitted that staff cuts would be made, but would not confirm extent. ChoicePoint counts approximately 5,000 employees, and LexisNexis' risk group employs 1,000.
Both ChoicePoint and LexisNexis have experienced their share of problems affecting their respective reputations. In 2005 ChoicePoint disclosed that thieves gained access to the company's database, possibly compromising the personal information of 163,000 Americans.
The following January, the company agreed to settle—with a payout of $15 million—Federal Trade Commission charges that its data warehouse’s security and record-handling procedures violated consumers' privacy rights. The company has since embraced stiffer security measures and continues to deliver education to the commercial and consumer marketplace about identity theft.
Also in 2005, LexisNexis disclosed that hackers got access to personal information of as many as 32,000 U.S. citizens in a database owned by LexisNexis.
And last month, ChoicePoint confirmed that an investigation by the Securities and Exchange Commission (SEC) into stock sales involving its top two executives had been closed without incurring any SEC charges.
All in all, Reed said it would assume roughly $500 million in ChoicePoint debt.
Sources: Associated Press, MarketWatch
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