(Adds Financial Times report paragraph 2, background paragraph
By Mark Potter and Gavin Haycock
LONDON May 4 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
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
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
In particular, Reuters strength in sales and trading would
fit well with Thomson's strong base with money managers and
"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
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
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).
"There is no certainty an offer will be made or necessary
approvals, including those required under Reuters constitution,
will be received," Reuters said in a statement.
Under Reuters ownership structure, a single golden share
held by The Reuters Founder Share Co. can block a hostile bid.
The Reuters Founder Share Co. is run by 15 trustees charged
with ensuring the "independence, impartiality, integrity and
freedom from bias" of the global news organisation.
An agreed bid, however, would be possible.
Reuters trustees were not immediately available for
European Union Internal Market Commissioner Charlie
McCreevy is keen to crack down on golden shares and has won
backing in the European Court of Justice. McCreevy sees golden
shares as hindering a basic tenet of the EU, the free movement
Reuters was founded in 1851 when German-born immigrant Paul
Julius Reuter opened an office in the City of London that
transmitted stock market quotes between London and Paris via
the new Calais-Dover cable. A few years before that he used
pigeons to fly stock prices between Aachen and Brussels.
The business now makes more than 90 percent of its revenues
from its financial services business.
Hit hard by the downturn in markets after the dot.com
bubble burst, Reuters under Chief Executive Tom Glocer has cut
costs and sold off non-core assets such as electronic broker
Instinet and has recently benefited from a recovery in
Thomson expanded its financial news content last year by
buying London-based AFX News for around $20 million. The new
Thomson-branded service is set for launch by the end of June.
Thomson expects to announce a buyer for its education assets by
end-June and has said it would use the proceeds to pursue
The cost of insuring Reuters debt against default swung,
dealers said, with five-year credit default swaps reaching a
high of around 41 basis points before falling back to around 34
basis points, still 12 basis points higher on the day.
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(Reporters and editors involved in the writing and editing of
this report may own Reuters securities and are bound by the
Reuters Code of Conduct, which restricts dealing in securities
in companies a journalist is reporting on.)
(Additional reporting by Reuters correspondents in London, New
York, Washington, Toronto and Brussels)