Canadian publisher Thomson Corp has agreed to buy Reuters for about £8.7 billion ($17.2 billion), creating the world’s leading provider of news and data for professional markets. Reuters Founders Share Company, which has the power to block a change of ownership at the 156-year-old company, backed the deal but it still needs regulatory clearance and shareholder approval, Thomson and Reuters said in a statement on Tuesday.
The US Department of Justice said it was likely to review the deal. Multinational companies need approval from regulators in Brussels, Washington and elsewhere to complete mergers.
British group Reuters was essentially a general news agency serving mainly media around the world until the 1970s when it became a pioneer in the provision of real-time financial data to trading screens. The takeover follows a recent US$5 billion bid by News Corp for Reuters’ US rival Dow Jones.
With 34 per cent of the financial information market, the new Thomson-Reuters will overtake privately-owned Bloomberg LP on 33 per cent, according to industry newsletter Inside Market Data. Thomson said it would do what was required to win antitrust clearance. Reuters Chief Executive Tom Glocer, who will head the combined group, declined to predict how long the process would take but said major disposals may not be needed.
“When the facts are examined as against the myths about the market, the regulatory authorities will say that not only is this a pro-competitive move, but just the dynamics of the market themselves are making it extremely competitive,” Reuters Chairman Niall FitzGerald said in an interview with Reuters. He said the two companies had been talking for nine months.
Analysts said the discount reflects uncertainty about when the deal will close and whether regulators will clear it. “Partly it’s just the uncertainty about how long it will take,” Glocer said in the Reuters TV interview.
The companies say the combination is a natural fit across geography and products, bringing together Reuters strength in real-time news and data with Thomson’s historical information.
For Thomson, the combination of the two companies adds muscle to its financial services business. For Reuters, it reduces its dependence on financial markets and opens up opportunities in news and research for other professionals.
The Thomson family, which owns 70 per cent of Thomson Corp via its Woodbridge holding company, has backed the takeover. Two Reuters shareholders, including one of the largest, ValueAct, have said the offer of 352-1/2 pence and 0.16 Thomson shares for each Reuters share is fair.
Thomson-Reuters will have revenues of more than $11 billion, 60 per cent from its combined financial information and news business, to be called Reuters, and 40 per cent from its law, tax and science markets, to be called Thomson-Reuters Professional.
The companies expect to make over $500 million of annual cost savings within three years of the deal closing, by reducing duplication in areas including data centres, communications networks and other support services.
When asked, they refused to comment on any job losses. They also declined to put a figure on revenue growth potential. “We just haven’t quantified that,” Glocer said. “In terms of value creation, I think there’ll be multiples of the cost synergies we’ve talked about today.”
Woodbridge, which will own 53 per cent of Thomson-Reuters, has pledged to support the Reuter Trust Principles of integrity, independence and freedom from bias. “We are satisfied that the commitments made by Thomson-Reuters and Woodbridge will ensure the endurance and protection of the Reuter Trust Principles in a new and exciting context,” Trustees’ chairman Pehr Gyllenhammar said in a statement. Woodbridge will be granted an exemption to the 15 per cent shareholding limit set by the Reuters Trust Principles as long as it remains controlled by the Thomson family.
Reuters journalists, however, expressed their “deep concerns” in an open letter to Gyllenhammar, “over whether a reconstituted Reuters would maintain the high standards of journalism and the integrity, independence and freedom from bias that have shaped the company’s 156-year-old reputation and are crucial to its future success.”
The management “just defended it really by saying that it’s good for business, it’s good for economies of scale,” said National Union of Journalists spokesman Barry Fitzpatrick. “It’s all about cutting jobs, I would say.”
Reuters, which has 16,800 staff and a presence in 131 countries, was the market leader in terminals for years before steadily losing ground to Bloomberg. The company’s 196 bureaus around the world will expand Thomson’s news organization beyond Thomson Financial News in North America and the AFX News service in Europe.
Thomson has transformed itself from an owner of newspapers and other print products into a leading provider of legal and financial information. It agreed this month to sell its education and publishing-related properties for $7.75 billion, freeing up cash to buy Reuters.
