Thomson and Reuters Outline a Combination

By: Thomson Corp. said Tuesday that Reuters CEO Tom Glocer would lead the combined company if Thomson succeeds in its $17.5 billion bid for Reuters Group PLC, creating the world's biggest financial news and information provider.

A combined Thomson-Reuters -- the name proposed by Thomson -- would have a market capitalization of around $45 billion, or a third of the global market, leapfrogging current market leader Bloomberg LP in providing real-time data to traders and investment professionals.

The companies outlined details of the proposed deal for the first time on Tuesday, revealing that several issues had already been agreed even while stressing that nothing had been finalized and there was no certainty a deal would proceed.

Analysts were optimistic, saying the proposed offer of 352.5 pence ($7.03) per Reuters share in cash and 0.16 Thomson shares for each Reuters Group PLC share was likely to go ahead without any major roadblocks.

While Reuters said discussions continue on a number of ''material aspects of the deal,'' analysts pointed out that agreement had already been reached on the major points of potential contention such as management issues.

The companies said in the joint statement the new company would retain its primary market listings in Toronto and London, but would be controlled by the Thomson family, which currently owns roughly 70 percent of the equity in Thomson Corp.

The companies said that Glocer would become CEO of Thomson-Reuters, while Thomson CEO and President Richard Harrington would retire.

''We don't see anyone else topping this offer, and we see the likelihood of a deal as high,'' said ABN Amro analyst Paul Gooden.

Numis Securities said a potential rival bidder couldn't be entirely ruled out, but also noted the expected synergies and that Thomson was ''the bidder best placed to secure Reuters.''

In their joint statement, the two companies said there was a ''powerful and compelling logic for the combination, which would create a global leader in the business-to-business information markets.''

Projected savings of $500 million within three years ''is greater than we would expect to be deliverable in a deal with any other suitor,'' said Charles Peacock, analyst at Seymour Pierce in London.

Reuters shares closed 2.3 percent higher on Tuesday at 630 pence ($12.54), after surging 25 percent on Friday when the company announced that it had received a takeover approach but did not name the suitor. Thomson announced Monday that it was the bidder.

Tuesday's trading was well below the offer price that Thomson said valued each Reuters share at 697 pence ($13.87), based on Thomson's closing share price of 47.69 Canadian dollars ($43.14) on Monday. The value fell further Tuesday as Thomson's shares dropped to 45.10 Canadian dollars ($40.83).

Investors could be worried that Thomson may be overpaying. Its U.S. shares fell $1.70, or 4 percent, to $41.13, in afternoon trading on Tuesday, and Reuters shares that trade in the U.S. fell 35 cents or to $76.15, after plunging 3.5 percent earlier in the morning.

Thomson, formally based in Toronto but with its operational head office in Stamford, Conn., has transformed itself in the last decade from an owner of newspapers and other print products into a leading provider of legal and financial information.

The company, which had sales in 2006 of $6.6 billion, has put its book division Thomson Learning, which provides a quarter of its revenue, up for sale to concentrate on providing information to business and profession markets. Thomson expects to gain around $5 billion from the divestment.

While London-based Reuters is known internationally for its general news operation, that is just a small part of its business. Of the company's 2006 revenue of $5.11 billion, only $338.3 million came from the media segment -- although its news is a key selling point for terminals as well.

Reuters competes with Thomson and Bloomberg in the lucrative field of providing data terminals to the world's major banks and brokerages. Reuters was the market leader for years before steadily losing ground to Bloomberg.

Thomson said that Woodbridge, the Thomson family holding company, would own approximately 53 percent of Thomson-Reuters, other Thomson shareholders would have 23 percent and Reuters shareholders about 24 percent.

The joint statement also stressed that the new company would adopt the principles which have been used to protect the editorial independence of Reuters' journalism, and no deal would go through without the assent of directors appointed to safeguard that independence.

That means gaining the consent of the Founders Share company, which was set up when Reuters listed on the London Stock Exchange in 1984 to act as a poison pill, giving the directors of the company the power to order any shareholder whose holding exceeds 15 percent to sell down the stake.