Mark Herlihy, Bloomberg
London: Thomson Corp., owner of the Westlaw Legal database and TradeWeb bond-trading network, agreed to buy Reuters Group Plc for 8.7 billion pounds ($17.2 billion or Rs35,579 crore) to become the biggest financial news and information company.
Shareholders of London-based Reuters will get 691 pence in cash and stock for each share, the companies said today. That’s 40% more than 3 May, the day before Reuters, the dominant currency-trading service, said it was in takeover talks.
The acquisition of Reuters, the 156-year-old news organization founded by Paul Julius Reuter that has grown to 2,400 journalists in 131 countries, will increase Toronto-based Thomson’s sales to $11 billion and triple its share of the financial data market to 34%. The deal is likely to face scrutiny from regulators, according to analysts including Anthony de Larrinaga at Societe Generale.
“For Thomson this deal puts them into a different league,” said Justin Urquhart Stewart, who helps oversee about $3 billion of shares as director of 7 Investment Management in London. “Combining with Reuters gives them an international brand name and global strength.”
Shares of Reuters gained as much as 22 pence, or 3.6%, to 627.5 pence, and traded at 619.75 pence at 8:08 am in London. Thomson shares declined 38 cents, or 0.8%, to C$46.36 yesterday in Toronto, giving the company a market value of C$29.7 billion ($26.8 billion).
Reuters shareholders will receive 352.5 pence in cash and 0.16 Thomson share for each Reuters share, the companies said in a statement.
Reuters Chief Executive Officer Tom Glocer will become CEO of Thomson-Reuters, and Thomson Corp. Chairman David Thomson will hold the same post at the combined company. The company will be dual-listed, with shares traded in Canada, the U.S. and the U.K.
Bloomberg LP, the closely held news and financial information company founded by New York City Mayor Michael R. Bloomberg, is the parent of Bloomberg News and competes with Reuters and Thomson in selling information and trading systems to the financial services industry.
Thomson, Reuters and Bloomberg also compete with New York- based Dow Jones & Co., which got a $5 billion bid from Rupert Murdoch’s News Corp. on 1 May. Reuters’s 196 bureaus would expand Thomson’s news organization beyond Thomson Financial News in North America and the AFX News service in Europe. Most of Thomson’s management and staff work in the company’s offices in Stamford, Connecticut.
Combining with Reuters would lift Thomson’s share of the financial data market to 34% from 11%, compared with Bloomberg LP’s 33% share, based on 2006 figures compiled by Inside Market Data.
The companies said they expect to save more than $500 million annually in three years after the combination.
“This is a good deal for both companies,” said Charles Peacock, an analyst at Seymour Pierce in London.
The transaction still carries the risk of being rejected by regulators. European Union antitrust authorities, in particular, are likely to examine the deal, analysts said. ABN Amro and Societe Generale lowered their recommendations on Reuters shares to “hold” on 10 May, citing the potential for the deal to fall through.
The acquisition won approval from the Reuters Founders Share Co., a board that controls a single share with special voting rights, the companies said. The board was established in 1984, when Reuters first sold shares to the public.
Labour unions at Reuters have expressed concern about the deal. The unions, which represent 2,400 editorial staff, yesterday called on the Founders Share board to “closely scrutinize” the purchase.
Among the principles that the Founders Share board must follow is the requirement that “Reuters shall at no time pass into the hands of any one interest, group or faction.”
The Thomson family will own 53% of the combined company through their Woodbridge holding company. Thomson’s minority shareholders will own 23%, and Reuters shareholders will have 24%.
Thomson-Reuters will adopt the Founders Share company structure, the companies said.
Thomson, which grew from a single newspaper in Timmins, Ontario, into one of the largest newspaper publishers in the world, at one time operated travel companies and department stores and explored for oil. Thomson has since sold many of its assets, including the newspapers, and now gets about 80% of its revenue from selling electronic information.
Thomson agreed on 11 May to sell its textbook and educational testing unit for $7.75 billion in cash to fund its bid for Reuters.
At Reuters, Glocer has closed more than 80 units and sold assets including electronic broker Instinet Group Inc. since becoming CEO in 2001. He also reduced costs by moving some editorial and data analysis jobs to Bangalore, India.
Reuters generates about two-thirds of its 2.57 billion pounds of annual revenue from selling terminals to banks, traders and financial institutions. The company provides financial analysis and data, as well as news to newspapers.