Reed Elsevier Group Plc, owner of the LexisNexis legal data business, agreed to buy Seisint Inc. for $775 million in cash to expand in the U.S. market for risk management.

Seisint’s Accurint product provides online access and analysis of public records to help governments and law firms with tasks including due diligence, debt recovery, pre-employment screening and identity checks, Reed Elsevier spokeswoman Susanna Smart said. The company’s technology will help LexisNexis process its own risk management content faster.

London-based Reed Elsevier is making its biggest acquisition since the $5.6 billion purchase of schoolbook publisher Harcourt General Inc. in 2001 to bolster its LexisNexis division at a time businesses and governments are seeking more security in dealing with individuals and companies. It is also investing more in LexisNexis’s global electronic system this year.

"Strategically, it makes sense because it’s a new growth area Reed Elsevier has been enthusiastic about,‘’ said Patrick Wollenberg, who helps manage $15 billion including Reed stock at Robeco Group in Rotterdam. ``The price is a bit of a concern. You need to have faith in the rate of growth continuing at the same level to get a decent return on investment.‘’

Shares of Reed Elsevier, which publishes trade magazines such as Variety, rose 1 pence to 500 pence in London. The stock has gained 8.2 percent this year, while the FT-SE 100 index fell 2.3 percent.

Fair Price

Boca Raton, Florida-based Seisint’s revenue will probably rise more than 40 percent to $115 million this year and earnings before interest, tax, depreciation and amortization will be about $45 million, Reed Elsevier said.

"At first sight the acquisition price, over six times sales or over 16 times Ebitda, is high compared with market average acquisition multiples’’ of about twice sales and 10 to 12 times Ebitda, Reinier Westeneng, an analyst at SNS Securities, said in a note to investors. However, in view of the strong growth prospects of Seisint, we think the price is fair.‘’

The purchase will add to Reed Elsevier’s earnings before integration costs, goodwill and intangible asset amortization in the first year, according to the statement.

Regulatory Clearance

Seisint Chief Executive Officer Paul Cameron, his management and Seisint technology development teams will stay with the company, Reed Elsevier’s Smart said. The transaction needs regulatory approval, she said.

Although Reed has paid a price which initially seems very high, it has acquired a top quality business in a fast growing sector,‘’ said Paul Richards, an analyst at Numis Securities who rates the shares ``add.‘’ The purchase may add about 2 percent to Reed Elsevier’s earnings next year, he said.

"The acquisition will accelerate LexisNexis’ future revenue and profit growth,‘’ LexisNexis Chief Executive Officer Andrew Prozes said in a statement.

Goldman Sachs Group Inc. analyst Chris Collett put his "in-line’’ rating on Reed Elsevier stock under review after the announcement. "The price `does not look cheap,‘’ he said in a note to investors.

Reed Elsevier CEO Crispin Davis has made more than 25 acquisitions in five years to reduce the company’s dependence on advertising. The Harcourt purchase boosted Reed Elsevier’s share of the education publishing market.

Selective Targeting

Now Davis is targeting the $5 billion risk management industry, which has grown between 7 percent and 9 percent annually over the past 10 years, according to Reed Elsevier.

LexisNexis is already in that market, offering services including identity checks and fraud prevention, Reed Elsevier said.

Reed Elsevier said in February it planned to boost spending by 50 million pounds ($93 million) on products including a global electronic system for LexisNexis.

Reed’s 5.75 percent bond due in 2008 was unchanged, according to RBC Capital Markets prices on Bloomberg. The extra premium, or spread, investors require to buy the bonds instead of equivalent government debt remained at 31 basis points, the prices showed. A basis point is 0.01 percentage point.

The company owes bondholders about 1.7 billion pounds and is rated A3 at Moody’s Investors Service and A- at Standard & Poor’s, both with stable outlooks. Moody’s & S&P may change those outlooks to negative, though they may await the publication of the company’s first-half earnings on Aug. 5, said Rick Mattila, a credit analyst at Dresdner Kleinwort Wasserstein, in a note to investors.

Reed Elsevier didn’t use a financial adviser for the transaction, Smart said. Paul, Hastings, Janofsky & Walker LLP provided legal advise.

Seisint was advised by Canadian Imperial Bank of Commerce and law firm Hunton & Williams.