Thomson Reuters to buy trade platform FXall for $625 million
NEW YORK/LONDON (Reuters) - Thomson Reuters Corp (TRI.TO) (TRI.N) plans to buy electronic foreign exchange platform FX Alliance Inc FX.N for about $625 million in cash, the news and information group said on Monday, expanding the customer base of one of its key businesses.
Thomson Reuters provides information and trading in the interbank foreign exchange market. The deal will strengthen the company's offerings to the buy-side investment community, including asset managers, corporations and hedge funds.
"It simply ramps up what is already a very strong market position in foreign exchange," said Claudio Aspesi, senior analyst with Sanford Bernstein.
He said the move marks Thomson Reuters' dedication to the financial services business and called the foreign exchange segment a "bright spot."
Thomson Reuters, which provides news and information to financial, legal, accounting and tax professionals, offered to pay $22 per share for FXall, a premium of about 40 percent over its Friday close of $15.70 on the New York Stock Exchange.
Shares of FXall jumped 39.6 percent to $21.92 in early trading on Monday. Shares of Thomson Reuters fell 1.6 percent to $28.00 on the NYSE.
Thomson Reuters underwent a series of structural changes and management shakeups in 2011 to address lackluster performance in some of its businesses targeting financial and banking clients. Its businesses aimed at legal, tax and accounting professionals have been much stronger.
"For quite some period of time, the official line was as capital would become available it would be devoted to the professional division first and foremost," Aspesi said.
"If there was a good opportunity within the financial service area of the company it should be exploited no matter what. It shows management is confident enough to do that."
The FXall deal signals that the pace of acquisitions is likely to accelerate over the next few years as Thomson Reuters looks for growth, particularly in the Financial & Risk segment, RBC analyst Drew McReynolds wrote in a note.
According to the Bank for International Settlements (BIS), which tracks foreign exchange turnover globally, dealing between banks in 2010 fell behind turnover between banks and non-bank financial institutions -- pension funds, hedge funds, insurance companies, etc. -- for the first time.
Trades with non banks made up 48 percent of counterparty turnover in 2010, against 39 percent for traditional interbank deals.
More than $5 trillion are settled in foreign exchange and FX derivatives on average per day, according to the latest CLS settlement data.
FXall, which provides 24-hour access to forex markets five days a week, was founded in 2000 and listed on the NYSE in February at $12 per share. The shares rose as much as 20 percent in their market debut.
Last week, the company announced a record total average daily trading volume of $98.6 billion in June, a 10 percent increase on both the previous month and on June 2011.
FXall's largest shareholder, Technology Crossover Ventures, as well as its chairman and CEO, Phil Weisberg, and Chief Financial Officer John Cooley -- who together own around 32.5 percent of its stock -- have already agreed to tender their holdings. The board recommended other shareholders also sign up.
Thomson Reuters said it expects the deal to close in the third quarter. Barclays is advising Thomson Reuters while JPMorgan is advising FXall.