Tuesday, May 15, 2007

Thomson Wins Over Reuters Board (Forbes)

By Parmy Olson

LONDON - The folks behind the Bloomberg boxes could be forgiven for have fretted a little on Tuesday morning. Thomson and Reuters Group had just announced their agreement to a takeover that will create one of the world's largest financial news providers, one which would just trump about the market share of the rival founded by New York City Mayor Michael Bloomberg.

The cash and stock deal sees Reuters shareholders getting 352.5 pence ($6.97) per share in cash, plus 0.16 shares in Thomson. That effectively values each Reuters share at 692 pence ($13.68) and Reuters Group at about £9.7 billion ($19.2 billion), based on Thomson (nyse: TOC - news - people )'s price of $42 (£21.24) on the New York Stock Exchange on Tuesday morning.

Shares in Reuters were up 21.75 pence (43 cents), or 3.6%, at 627.25 pence ($12.39), in Tuesday morning trading in London, still well below the bid price as investors continued to mull the regulatory outcome of the deal. Thomson-Reuters will keep dual listings in Toronto and London, and Tom Glocer, the well-regarded chief executive of Reuters, will head the combined company.

Just last week Thomson was able to free up the cash for its bid when it sold its educational division for $7.8 billion. (See: "Thomson Holds A Book Sale")

Though the combination still needs to squeeze past regulators in order to become official, Thomson appears to have, crucially, won the approval of Reuters Group's (nasdaq: RTRSY - news - people ) trustees, who have the power the veto any takeover of the 156-year-old company.

That's despite the fact that Canada's wealthy Thomson family will own about 53% of Thomson-Reuters. Traditionally the directors of the Reuters Founders Share Company must ensure that no party owns more than 15% of Reuters shares, so it appears that the Thomson, together with Reuters management and the trustees, have agreed to alter that limit.

The 18 "guardians" of the Reuter Trust Principles said in a statement on Tuesday that they had worked closely with Thomson and Reuters over the last week to ensure the company's code of editorial independence would be upheld after the takeover. The combined business will adopt the Trust Principles, Thomson and Reuters said, and the Thomson family, represented by holding company Woodbridge, would "use its voting control to support the Reuter Trust Principles."

Thomson's historical connections to the British newspaper establishment -- it once owned the Times of London -- and reputation for hands-off stewardship will no doubt have helped Thomson in negotiations. As well as being the world's 10th-richest person, Chairman David Thomson is also the third Baron Thomson of Fleet Street, that being the famous road in London on which many of the U.K.'s biggest newspapers, along with Reuters, used to be based. The title was created for his grandfather, company founder Roy Thomson.

Thomson, Reuters and Bloomberg have been competing to sell data terminals to large banks, brokerages and hedge funds. But the new alliance will now put significant pressure on market leader Bloomberg.

That company has a 33% market share for financial-information terminals, according to Inside Market Data Reference, but the Thomson-Reuters combination should put it just ahead with 34% of the market. Regulators might not like that, since the market will in effect be divided into three parts and limit the choice for buyers to two media powerhouses and a cluster of small companies.

It's perhaps worth noting, though, that Thomson has managed to shimmy past regulators before. Just prior to its $3.4 billion takeover of legal information provider West Publishing in 1996, Thomson and West had been the two largest legal publishers in the U.S.

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