Thomson Reuters – Blackstone Deal: Cause and Impact Analysis

As per the  sources, US private equity firm Blackstone Group LP is in advanced talks to buy an approximate 55% stake (controlling stake) in the financial and risk (F&R) business of Thomson Reuters Corp for the consideration more than $20bn including debt. Further, it is unclear currently how the proposed deal would be viewed by trustees of the Thomson Reuters Founders Share Co. Thomson Reuters Founders Share Co’s chairman, Kim Williams, did not comment on the deal.

Meanwhile, Thomson Reuters have sold its non-core assets. That included its intellectual property and science business, to private equity firms Onex Corp and Baring Private Equity Asia for $3.55 billion in 2016.

Financial Consideration

Thomson Reuters would get more than $17 billion for the deal. This includes approximately $4 billion in cash from Blackstone and about $13 billion would be financed by new debt taken on by the new F&R partnership. Thomson Reuters’ management is expected to meet on Tuesday to discuss Blackstone’s offer for the F&R business. Currently F&R business contributes more than half of Thomson Reuters’ annual revenues.

Thomson Reuters – Blackstone Deal Impact

If Thomson Reuters Corp accepts the Blackstone Group offer, the company would retain with themselves 45% stake in the F&R business as part of a partnership with the US buyout firm. Thomson Reuters would have its international news service, Reuters, with themselves along with its legal and tax and accounting divisions. The details of the arrangement could not be determined but Reuters is expected to continue to supply news to F&R’s flagship desktop product, Eikon, as well as to other products.

For Blackstone, if the deal happens, it will put the buyout firm in direct competition with Bloomberg LP as well as News Corp’s Dow Jones division in selling data services, analytical and trading tools to Wall Street.

What Forced Reuters for Mega Deal

Thomson Reuters, after it formed in 2008, has carried out more than 200 acquisitions, but the company struggled to integrate some of the assets it acquired, especially in its F&R division, that was badly hit by the financial crisis. The growth in the business has slowed as banks and brokerages shrank due to the weak trading. However, the regulation and compliance business has been a bright spot. Therefore, to  smoothen its business, Thomson Reuters has reduced the number of products within its F&R segment and reduced its workforce.