Reuters gets $17.5bn offer from Thomson

Canada's Thomson Corporation has announced a preliminary takeover offer worth over 8.7 billion pound ($17.5 billion) in cash and stock for Reuters Group Plc, one of the world's largest leading publicly traded financial data provider.

In less than a week after Reuters first disclosed an unsolicited takeover approach from an unidentified suitor, the two companies said in a joint statement that they were in talks for combining their businesses to create a "global leader in business-to-business information markets."

The announcement came late in the night yesterday within hours of Thomson confirming that it has made a preliminary approach to Reuters, which also runs a leading international news agency.

Under the terms of the proposed agreement, Reuters' shareholders would get 352.5 pence and 0.16 Thomson stock per share. Based on Thomson's closing price yesterday, the offer values Reuters at 697 pence a share, representing nearly 13% premium over the London-listed Reuters' last closing price.

Thomson's bid for Reuters comes on the heels of media baron Rupert Murdoch making a $5 billion hostile bid for US-based media giant Dow Jones group, which also owns news brands like The Wall Street Journal and Dow Jones Newswires.

The shares of Reuters were trading nearly four per cent up at 642 pence a share in early morning trade, putting the company's market capitalisation at about 8.1 billion pound.

The two companies said that a potential deal would result in annual synergies worth over $500 million within three years.

The enlarged group would be called Thomson-Reuters, while the combination of Reuters' financial and media businesses and Thomson Financial unit would be named as Reuters.

In addition to the cash and stock offer, Reuters said it would also declare a dividend of 12 pence a share with five pence as an interim dividend and seven pence as a final dividend if the deal closes before the year end.
If the deal closes beyond the year-end, the company will also pay a proportionate dividend for 2008.

As per the proposed shareholding structure of the combined entity, Woolbridge, the Thomson family holding company, would own about 53% of Thomson-Reuters, other Thomson shareholders would hold about 23% and Reuters shareholders would hold the remaining 24%.

Shares of Thomson, which are listed in Toronto as well as the US, fell 86 cents to 47.23 Canadian dollars on the Toronto Stock Exchange yesterday, putting the company's market value at about $27.4 billion.

The combined entity would also adopt the Reuters Trust Principles and Reuters Founders Share Company structure.

As per Reuters' current constitution, the Reuters Founder Share Co, which is run by 15 trustees, can block any hostile bid with a single "golden" share. However, the trustees do not have such rights in case of an agreed takeover bid.

The two companies said that Thomson CWO and President Richard J Harrington would retire at the successful completion of the deal and Reuters CEO Tom Glocer would take over as the CEO of the combined company.