Reuters soars on approach, Thomson touted as bidder

By Mark Potter and Gavin Haycock

LONDON (Reuters) - News and financial data provider Reuters RTR.L RTRSY.O said on Friday it had received a takeover approach, sending its shares up almost a third, with Canadian publisher Thomson TOC.TO widely touted as the mystery suitor.

Canada's Globe and Mail newspaper and several U.S. and British publications reported on their Web sites that the bidder was Thomson Corp. TOC.N, citing sources familiar with the situation. The Financial Times later reported on its Web site that Reuters looked set to endorse an offer from Thomson.

Reuters declined to name its suitor, while Thomson had no comment throughout the day. But Reuters second-largest shareholder, ValueAct, said depending on the offer, it would support a sale and a merger with Thomson would be a "fabulous combination".

Reuters shares leapt as much as 32 percent to a five-year high of 649-3/4 pence, valuing the company at about 8.2 billion pounds ($16.3 billion), on hopes a bid would spark an auction for the world's biggest international news agency.

Media shares have surged since Tuesday when Rupert Murdoch's News Corp. NWSa.N made a $5 billion bid for Wall Street Journal owner Dow Jones & Co Inc. DJ.N, which was rebuffed by Dow Jones' controlling shareholders. That $60-a-share-bid was a 65 percent premium to Dow Jones' closing price on Monday.

Thomson has been building up its financial news business and is in the process of selling its education division, which analysts think could raise $5 billion.

The Toronto-based firm lies third in a financial information market dominated by Reuters and privately-owned Bloomberg, and buying Reuters would give it a clear market lead while also offering considerable cost savings, according to analysts.

In particular, Reuters strength in sales and trading would fit well with Thomson's strong base with money managers and investment bankers.

"Thomson and Reuters would be a good fit," Numis Securities analysts wrote in a research note. Other analysts said a trade buyer could pay up to 750 pence a share for Reuters.

Traders said there were hopes a bid from Thomson could spark an auction, with News Corp, Web search group Google (GOOG.O), software giant Microsoft (MSFT.O) and private equity groups possibly working with management tipped as possible bidders.

Bloomberg said it was not looking to buy Reuters.

"Reuters will add to Thomson Financial's position in institutional fixed income and sales and trading," Merrill Lynch analysts wrote in a research note. "There could be a large amount of cost savings potential, but the integration process will likely be challenging and complicated."

One banking source said Thomson was unlikely to be able to pay for a deal fully in cash, while an anti-trust lawyer in Washington, who requested anonymity, said it could face "really serious issues" with competition regulators. Thomson's First Call data service, for example, competes with Reuters Estimates.

Reuters shares closed up 25.1 percent at 615-3/4 pence, their biggest daily rise since flotation in 1984. Thomson shares were down less than 1 percent, valuing the business at about 31 billion Canadian dollars ($28 billion).

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