Thomson Group wins bid for Reuters

February 19, 2008 9:01:38 AM PST
Thomson Corp. won European regulatory approval Tuesday to buy news and information provider Reuters Group PLC but must sell off financial research units to eliminate antitrust concerns, the European Commission said.EU regulators said the two companies had also agreed with the U.S. Department of Justice and Canadian authorities that Reuters would divest its Reuters Estimates, Reuters Aftermarket Research and Reuters Economics (EcoWin) databases that supply financial-market research reports, earnings estimates and economic data archives.

Thomson would shed copies of Thomson Fundamentals (Worldscope) which provides basic financial data on companies. It may keep Worldscope databases for its own use but cannot sell the information to others.

The EU said this was necessary to make sure financial institutions and customers of these products were not faced with "a reduced choice, the likelihood of price increases and a severe risk of discontinuation of overlapping products."

The companies said they now expect to complete the deal by April 13 and will seek shareholder and court approval for the selloffs. Reuters and Thomson shareholder meetings have been scheduled for March 26.

Thomson has 60 days to shed copies of Thomson Fundamentals (Worldscope) but there is no time limit for the other sales as well as some customer contracts and employees.

EU Competition Commissioner Neelie Kroes said the two companies had offered a package "that provides strong safeguards that users of financial data will not be harmed by this major consolidation."

Tom Glocer, the Reuters chief executive who will head the new company, said EU and U.S. regulatory approval was an important step toward forming "the leading provider of information and related applications to businesses and professionals around the world."

Thomson's 8.1 billion pound ($15.8 billion) bid for Reuters cuts the number of major companies selling information and trading systems to the financial services industry from three - Reuters, Thomson and privately owned Bloomberg LP - to just two.

The combination of Reuters, founded when Paul Julius Reuter began transmitting stock market quotations between London and Paris via the new Calais-Dover cable in 1851, and relative newcomer Thomson would generate sales in excess of $11 billion and just edge out Bloomberg in market share.

EU regulators said they were unhappy about the original lineup of the deal and were worried that it would have reduced competition for aftermarket broker research reports that analyze securities, industries or markets and supply estimates of future company earnings and information on how a company is performing.

The deal would also have damaged technology companies that supply the terminals which gather and combine this data for customers, the EU said. Thomson-Reuters "would have had the ability and the incentive" to cut them off if it wanted to hike prices.

Selling off the databases - including assets, personnel and customer base - satisfies EU worries and would give financial information providers a new alternative supplier, the Commission said.

EU regulators said their investigation and the negotiation of the settlement package was done in parallel with U.S. officials.

"The U.S. Department of Justice announced today that it will propose a settlement agreement with divestitures by the parties which are consistent with the remedies accepted by the Commission," the EU executive said.

Reuters' market share of 23 percent and Thomson's 11 percent would combine for a total Thomson-Reuters Corp. share of 34 percent, according to April figures from Inside Market Data Reference. Bloomberg, founded by New York Mayor Michael Bloomberg, has a 33 percent share.

Reuters and Thomson share the midlevel market for trading customers and could argue that the deal would leave them better placed to compete with Bloomberg for higher-end customers where it currently dominates.

London-based Reuters is also more focused on Europe, while Thomson - formally based in Toronto but run from Stamford, Conn. - is stronger in North America.