|New buyer in Divine unit talks|
Library-service fees negotiated
By Rob Kaiser and Robert Manor
Tribune staff reporters
January 25, 2003
A Dutch company has pulled out of talks to buy a library subscription service owned by Chicago-based Divine Inc., but another firm reportedly is close to striking a deal that would help thousands of libraries get needed periodicals.
Swets Blackwell, of Lisse, The Netherlands, said Friday that the company has withdrawn its bid to acquire RoweCom, a subsidiary of Divine, after the groups couldn't come to terms.
But another firm, EBSCO Information Services of Birmingham, Ala., is close to reaching a deal to buy the unit, according to a source familiar with the talks.
RoweCom accepted at least $50 million from 4,000 libraries last year to arrange subscriptions for essential periodicals, but never paid the publishers.
Negotiators for Swets Blackwell had tried for an arrangement in which their company and Divine would put up part of the money for the subscriptions, and publishers would offer a one-year discount to make up the remainder.
"The liability issues seemed too great," said Alan J. Hess, vice president of sales and marketing for Swets Blackwell in the United States.
A spokeswoman for EBSCO declined to comment, saying, "We have a confidentiality agreement." Divine officials did not respond to calls for comment.
RoweCom creditors have sought to separate negotiations with EBSCO from those with Divine.
Under the agreement currently being negotiated, EBSCO would come up with between $10 million and $14 million to cover RoweCom obligations and buy the company. The publishers would discount subscription prices for 2003, likely by more than half, and then inherit claims that the libraries currently have against Divine, according to the source familiar with the talks.
Exact figures on how much EBSCO will pay and how much the publishers will discount prices would be determined only after thousands of libraries and publishers decide whether to participate.
The libraries would still suffer some losses because not all publishers are expected to participate in the arrangement. A second set of negotiations would then deal with Divine, which collected at least $50 million in subscription payments that it didn't forward to publishers.
The two options are to get a cash payment from Divine and have a lien against the company's future earnings or immediately seek all of the money from Divine and "punish the villains," the source said.
RoweCom has already been sued by the New York State attorney general's office, which wants to recover subscription money paid by the state university system.
Originally called Faxon, RoweCom was a major player in the subscription aggregation business. The company would put together periodical requests from corporate, public and university libraries in North America and Europe.
Many of the periodicals are scientific, technical or medical in nature, and are vital to many users.
Divine purchased RoweCom in 2001, after several years in which the company lost money. Divine executives say they spent the libraries' $50 million on RoweCom's operating expenses and repaying its debts. Divine says now that it is getting out of the subscription aggregation business.
EBSCO is a 60-year-old company with offices in 19 countries, a business relationship with 60,000 publishers and maintains a database of more than 282,000 publications.
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