Thomson Reuters debuts amid global market jitters
LONDON/NEW YORK (Reuters) - Shares of global information company Thomson Reuters Corp (TRI.TO)(TRI.N)TRIL.LTRIN.O fell in their debut on Thursday on concerns over a financial industry downturn.
The new company, formed by Thomson's purchase of Reuters for more than $16 billion in cash and stock, hopes its portfolio of products, ranging from financial to legal and health care, will help it ride out the credit crisis.
The combination allows Thomson to expand its financial data offering from its North American base, and is meant to help Reuters reduce its exposure to financial markets.
Even so, brokerage ABN put a "sell" rating on the stock, arguing that the financial industry is facing big job cuts and takeovers.
Goldman Sachs analyst Peter Appert, who has a "neutral" rating on the stock, offered a similar downbeat assessment.
"The timing in some respects couldn't be worse," Appert said. "You are dramatically expanding your exposure to the financial services industry at a time when the financial services industry is arguably facing its toughest environment in the past decade."
Indeed, Merrill Lynch MER.N said on Thursday it would cut 2,900 jobs after a $2 billion quarterly loss.
Shares in Thomson Reuters, which announced that it may buy back up to $500 million of its shares over the year, fell around 5 percent in Toronto and New York.
The London shares also fell and traded at a discount of about 13 percent to the North American-listed shares.
Analysts had expected the London-listed shares to trade at a discount to the Toronto shares, citing the changing shareholder base and the unwinding of arbitrage trades that had bet on Reuters shares rising to the Thomson offer price.
Thomson Reuters, headed by former Reuters chief Tom Glocer, sells electronic news and data to traders, fund managers and analysts, as well as databases and other information to lawyers, accountants, scientists and the health-care industry.
The new company, with headquarters in New York, has annual revenues of $12.5 billion, 50,000 employees and more than 40,000 customers in 155 countries.
Glocer, a former mergers and acquisitions lawyer, envisions a company that will provide "intelligent information" that people will pay for, he told Reuters in an interview.
"It's not just: 'Isn't it nice that instead of Reuters having 90 percent-plus concentration in financial, there'll be a more hedged, balanced portfolio," he said.
"What I think is more interesting is all of these units are going to work together over the long haul."
Thomson's publishing roots date back to 1934 when Toronto native Roy Thomson bought The Timmins Press in Northern Ontario.
The Thomson family has since been involved in textbook and newspaper publishing, at one point owning the Times of London.
Thomson sold The Times in 1981 and sharpened its focus on data publishing when it sold its North Sea oil interests in 1989 and Thomson Travel in 1998 and education business last year.
Reuters started in 1851 when German-born Paul Julius Reuter transmitted stock market quotes between London and Paris on the Calais-Dover cable. Before that, he used pigeons to fly stock prices between Aachen in Germany and Brussels.
This was the beginning of the Reuters news service, which now has 2,400 journalists and became the foundation for a $5 billion-a-year news and financial data empire.
The newly formed company's markets division with $7.4 billion in annual sales competes with Bloomberg LP for financial industry clients.
Bloomberg and Thomson Reuters each have about a third of the global financial data market, according to Atradia Consulting Director David Anderson.
Rivals also include Dow Jones & Co, now a unit of Rupert Murdoch's News Corp NWSa.N, and Anglo-Dutch publisher Reed Elsevier (REL.L). Reed owns the LexisNexis legal database, a competing offering to Thomson's Westlaw, and competes with the company's $5.1 billion-a-year professional division.
The credit crisis, an economic downturn and meltdowns among investment banks such as Bear Stearns could hurt providers of financial data tools and products.
"A growing number of brokers, dealers, traders and banking staff will be sacked," Atradia's Anderson said.
Glocer, on the other hand, said the company was benefiting from hot demand for foreign exchange and energy data and was less exposed to problem areas like mortgage desks than rivals.
The group's first-quarter results next month will provide the first opportunity for a "candid outlook" for the enlarged group, Credit Suisse said.
"It's obviously challenging times," said Thomson Reuters Deputy Chairman W. Geoffrey Beattie.
But he added that information providers had not kept up with the breakneck growth in industries such financial services, tax, accounting, science and health in recent years.
"So the absolute growth of those industries in my mind is not as important as our ability to catch up and serve those businesses as they continue to grow," he said.
The company's immediate priority is to marry the Reuters array of financial products, such as the flagship 3000Xtra, with Thomson's products, such as ThomsonONE, which includes FirstCall company profit estimates.
Down the road, the challenge will be to integrate the financial products with the professional services.
(Additional reporting by Wojtek Dabrowski in Toronto and Mark Potter in London)