Thomson and Reuters confirmed market rumours yesterday by disclosing in a joint statement that the two companies were in talks that were intended to lead to he acquisition of Reuters by Thomson for about 8.6 billion ($17 billion). If agreed, and authorised by shareholders and regulators in both he United States and Europe, it would create the biggest financial news and data company in the world.
In a joint statement, Thomson and Reuters emphasized that discussions are at a stage where there is no assurance agreement will be reached. “No transaction will be announced without the support of the Reuters Founders Share Company,” the companies said.
Under the terms of the proposed deal, the Thomson family, which owns 70 per cent of the Toronto-based group, would own 53 percent of the combined company. Other Thomson shareholders would own 23 percent of the combined business and Reuters shareholders would own 24 percent.
But the Reuters Founders Share Company trustees are obliged to maintain the independence of the news and data organization. The Reuters Founders Share Co, run by 15 trustees, has a “golden share” and could block a takeover.
The two parties propose to circumvent this by calling the combined Thomson Financial unit and Reuters financial and media businesses Reuters, and adopting the Reuters trust principles aimed at protecting the independence of its news operation.
Under the proposed deal, a so-called “equalization agreement” would allow both companies’ primary listings to be maintained. This should allow the two companies to remain in their existing equity indexes, the companies said.
Thomson and Reuters said they expected to make over $500 million of annual savings within three years of completion of a deal, which could come this or next year.
Under the terms of the proposed deal, Reuters Chief Executive Tom Glocer would become chief executive of a dual-listed group to be called Thomson-Reuters, the companies said in a joint statement.
Reuters investors would get 352-1/2 pence in cash and 0.16 of one Thomson share for each Reuters share, making he offer worth 686 pence a share at Monday’s closing prices, or 28 percent above Reuters’ closing share price on Thursday, the day before news of the talks emerged.
Thomson, whose interests include a half-share in the securities trade matching utility Omgeo – the other half is owned by the American CSD, DTCC – has been building a financial data business for many years, and its Thomson One desktop distribution network competes with both Reuters and Bloomberg.
Thomson has an estimated 11 per cent share of the $12.5 billion global market data business. Adding Reuters would increase that to 34 per cent, against 33 per cent for the privately-owned Bloomberg. The Thomson bid is the second major bid in the media sector in the last few days. Last week, Rupert Murdoch’s News Corporation made a $5 billion bid for Wall Street Journal owner Dow Jones & Co Inc. The offer was rejected by Dow Jones’ controlling investors.