The much rumoured and long expected deal for Reuters to acquire Moneyline Telerate, is finally going through, the companies confirm. The consideration, subject to completion adjustments, is made up of $100 million (52 M) in cash and Reuters 14% holding in Savvis Communications Corporation, which is currently convertible into approximately 75 million shares of Savvis common stock. On 17 December 2004, the trading day before the date of this announcement, the closing price for Savvis common stock was $1.00 (0.52).
Based in New York, Telerate is a global provider of benchmark content for the capital markets. With a primary focus on money markets, fixed income, foreign exchange and over-the-counter derivatives, the company provides services to more than 3,500 customers and has more than 30,000 user accesses in 85 countries and territories around the world.
With the acquisition of Telerate, (see Squawkbox, July 26), Reuters will extend its presence among core financial customers, including fixed income, buy-side firms and regional dealers. The acquisition provides further impetus to Reuters Fast Forward goal to be the best in class provider of financial content, electronic transactions and distribution to market participants. Reuters is uniquely placed to achieve cost synergies from the acquisition as Telerate’s information distribution infrastructure operates on Reuters systems. In the transaction, Reuters will take on all customer agreements and support for Telerate products and services.
Reuters expects to spend approximately $82 million (43 M) to integrate Telerate fully with the result that the acquisition is expected to be dilutive to Reuters adjusted EPS1 during the integration period. Upon completion of integration, which is anticipated to take 18 months, the acquisition is expected to become accretive to Reuters adjusted EPS and operating margins2. The parties expect the deal to close in mid-2005, subject to regulatory approvals.
Tom Glocer, Reuters Group chief executive says "Our aim for this acquisition is clear: to deliver value to customers through a broader, integrated content set and a larger trading community, and to investors through aggressive cost reduction.”
"This acquisition will greatly enhance our recently announced effort to add trading capabilities to Reuters desktops, especially in the fixed income markets, where the substantial Telerate client base will benefit our growing trading community. We plan to integrate Telerate with Reuters using the same tried and tested method employed with our Bridge and Multex acquisitions."
Telerate’s 2003 revenue was $292 M (152 M). For the first three quarters of 2004, Telerate’s revenue was $205 M (106 M), with an operating loss of $34 million (18 M) before depreciation and amortization.
In connection with this transaction, Reuters and Quick Corp. have signed an agreement for Reuters to acquire Quick Moneyline Telerate (QMT), a division of Quick Corp. that serves as the exclusive distributor of Telerate products in Japan. Under the separate agreement, Reuters will pay JPY1.1 billion (6 M) in cash, subject to certain adjustments, and Reuters current 4.85% holding in Quick for the QMT business. The parties have agreed to value the total consideration for the QMT acquisition at JPY1.9 billion (10 M).
The QMT purchase is expected to occur simultaneously with, and is conditional on, the completion of the Telerate acquisition. Business will continue as usual for all parties involved through to completion.
The cash purchase price for the Telerate acquisition is subject to adjustment based on the level of working capital, and will increase by an amount currently estimated to be $28 million (15 M) to the extent certain independent actions Telerate may take prior to closing result in corresponding reduction of Reuters $82 million (43 M) anticipated restructuring costs.
As part of the transaction, Reuters will provide $34 million (18 M) in funding to Telerate, which together with interest will be applied against the purchase price upon the closing or repaid in the event the deal does not proceed. The parties have also agreed to modify the current agreement under which Reuters provides support services and licenses to Telerate, including extending the contract period while the deal is pending, and, in the event the deal is terminated, to extend the agreement by approximately two years.
Telerate has a pre-existing network services agreement with Savvis relating to Telerate services which Reuters will also acquire in the deal.