US private equity group Blackstone has agreed to buy 55% of the Financial and Risk (F&R) business of Thomson Reuters – a unit that includes the trading platforms owned by the firm.
The deal values the F&R Division at $20 billion the firms say, adding that Thomson Reuters will receive around $17 billion in gross proceeds, roughly what – in dollar terms – Thomson Corporation paid for Reuters when it bought it in 2008. Thomson Reuters will retain the news service as well as the legal and tax and accounting divisions, it would also retain a 45% stake in the new business, which will provide news, data, analytics and trading services.
Rumours have been a regular feature of the landscape surrounding Thomson Reuters Financial and Risk Division even while it continued to acquire companies at a steady rate.
One source who claims knowledge of the firm spoken to believes a deal is attractive to Thomson Reuters because it has not managed to extract the expected value from many of those acquisitions. “There is a lot of legacy technology around the firm that it can’t integrate properly, which means units continue to operate independently of each other,” the source says. “This has meant that Thomson Reuters has been unable to put away several competitors when it should have done so and means a new approach may be required.”
In a statement Thomson Reuters says Reuters News remains part of its franchise and that F&R will enter into 30-year agreement to secure access to news services provided by Reuters for a minimum of $325 million annually. “Reuters News will maintain complete editorial freedom, and continue to operate under the Trust Principles,” says Jim Smith president and CEO of Thomson Reuters. “There has never been a more important time for providing trusted news, and that is what Reuters will continue to deliver on with accuracy and integrity,”
Thomson Reuters also says it plans to use the net proceeds to invest in its core Legal and Tax & Accounting units, pay down debt and repurchase shares.
The Canada Pension Plan Investment Board (CPPIB) and Singapore’s GIC will invest alongside Blackstone for the transaction, however the firms do not disclose the extent of their financial interest.
“This deal strengthens F&R and should accelerate its growth and benefit its customers across the sell-side, buy-side and trading venues,” says Smith. “Blackstone’s strong relationships in the financial services industry and long and successful history of corporate partnerships will help F&R provide new and innovative products and services, drive further efficiencies and navigate ongoing industry consolidation.
“I am proud of the F&R organisation and all of the hard work that has gone into turning around the business over the last six years,” he continues. “Today’s announcement reflects the strength of the F&R business and its future potential. We believe F&R will be even stronger with Blackstone as a partner. The transaction will provide immediate value to Thomson Reuters shareholders and our ownership interest in F&R will enable Thomson Reuters to participate in the future upside of the business.”
Martin Brand, a senior managing director at Blackstone, adds, “We are excited to partner with Thomson Reuters – one of the most trusted companies in financial technology. The F&R division has tremendous assets, including a world-leading data business, essential risk and compliance solutions, OTC trading venues, wealth management software, and a strong desktop business. The partnership with Blackstone provides an opportunity to increase efficiency and accelerate revenue growth through innovation and focus on creating uniquely compelling products for F&R’s customers.”
The new partnership will be managed by a 10 person board composed of five representatives from Blackstone and four from Thomson Reuters. The president and CEO of the new partnership will serve as a non-voting member of the board following the closing of the transaction.