Toronto-based Thomson Corp. on May 15 agreed to buy London-based Reuters Group for $17.2 billion. Should the deal meet with shareholder and regulatory approval, which could take up to a year, the combined entity would surpass Bloomberg as the world’s largest provider of financial data. It would hold a 34% market share, compared with 33% for Bloomberg, according to Inside Market Data Reference.
“Steep price aside, it’s a great combination and a very powerful one over the long term,” said Scott Peters, a managing director at media investment bank Jordan, Edmiston Group. “You have the consolidation of two companies that complement one another with not a lot of overlap.”
Peters said the combination would have a ripple effect on other business information providers. “It moves from being fragmented to a powerhouse that can give Bloomberg a run for its money.” Companies with a heavy reliance on financial information for revenue, such as Dow Jones & Co. and McGraw-Hill Cos., “have some things to think about,” he said.
David Worlock, chief research fellow at market research company Outsell Inc., amplified Peters’ comments, saying the Thomson-Reuters deal could have an impact on Dow Jones, which has deals to distribute its financial content through both Reuters and Thomson.
With Reuters’ newswires added to its portfolio, Thomson may be less likely to distribute content from Dow Jones Newswires, Worlock said. “It definitely puts Dow Jones in a weaker position,” he said.
(Dow Jones itself is being targeted for a takeover by News Corp., which has offered $5 billion for the company that publishes The Wall Street Journal and Barron’s, among many products. Several members of the Bancroft family, which holds 64% of the voting power at Dow Jones, have stated that they are against the offer, but News Corp. Chairman-CEO Rupert Murdoch has vowed to press on.)
On paper, the Thomson-Reuters merger appears advantageous for both companies. It would boost Thomson’s financial services business and reduce Reuters’ exposure to cyclical advertising.
The combined Thomson Financial unit and Reuters financial and media businesses would be called Reuters. Thomson’s professional businesses—legal, tax and accounting, scientific and health care—would be called Thomson-Reuters Professional.
While shareholder approval is expected, regulatory hurdles will not be easy to clear, according to analysts. The onus will be on Thomson and Reuters to show that the deal is not anticompetitive.
“The regulatory issue is the fly in the ointment,” said Roland DeSilva, managing partner and co-founder of media investment bank DeSilva & Phillips.
DeSilva said that combining Thomson and Reuters content is at the heart of the deal. “In order to transform the delivery system [of business information] you have to own content and the audience to make sure that the transition is effective,” he said.
Outsell’s Worlock said the deal is in keeping with marketers’ shifting demands. “Marketers are looking for large solutions and content provided by a handful of competing players,” he said. “It can also be two players, if that works.”