Farewell to New Scientist, Variety and Estates Gazette. Reed Elsevier is dumping these and other plum titles with pedigrees going back decades to snap up an anonymous and youthful American business supplying data to insurance companies.

Sir Crispin Davis, the chief executive, is, in essence, turning his back on print, cyclicality and low-growth businesses in favour of online, defensive and higher growth. Advertising revenues will matter even less, while reliable subscription-style contractual relationships will matter still more.

In the immediate aftermath of the dot-com bust, such a move would have been considered reckless. But online is now so well established as the future for most media businesses that investors had no hesitation in applauding the move. Reed's shares were the biggest risers in the Footsie yesterday.

The thumbs-up from Reed shareholders may also have something to do with the singular business model of ChoicePoint. It makes money by taking customer information from insurance companies for free, crunching it and manipulating it in interesting ways, then selling it back to the same insurers for big bucks. Nice work if you can get it, and ChoicePoint certainly has, with a market share of something like 80 per cent in its core business. The clients have no complaints, either. According to Sir Crispin, the company has lost only one of its top 600 insurance customers in the past ten years. That suggests unprecedented customer loyalty.

Reed's move is uncompromising and decisive but not without risk. At $4 billion, it is the biggest deal in five years. It is paying a high price, 25 times annual profits and a 45 per cent premium to the ChoicePoint share price ahead of yesterday's announcement.

The deal makes Reed even more dependent on the sole market of America, which now contributes well over half of total revenues and is of course headed in the short run into a nasty downturn. Moreover, Reed has geared up and committed to the new acquisition before offloading the now unwanted magazines division. Reed can afford to hold on to it if need be, or simply to demerge it, but a trade sale would be preferable to get borrowings back down.

Deserting well-known, reliable brands on relatively low valuations to buy a business with a track record of less than a decade on a high valuation is undoubtedly bold. But Reed has the expertise to make it work.

patrick.hosking@thetimes.co.uk

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