Thomson and Reuters confirm 17.6 billion buyout talks

Reuters shares rose as much as 7 per cent to a five-year high of 659 pence in early trade. They were up 2.2 per cent at 629 pence, well short of the proposed bid price, on concerns about the length of time to complete a deal and possible obstructions from competition regulators. 8220;We would expect close US and EC European Commission regulatory scrutiny,8221; Credit Suisse analysts said in a note.

Thomson, whose publishing interests span law, tax and scientific research, has been building up its financial data business as it looks to tap into booming global markets. Currently third with 11 per cent of the world8217;s 12.5 billion market data business, Thomson would jump to 34 per cent with Reuters, putting it just ahead of privately-owned Bloomberg on 33 per cent, according to Inside Market Data.

A deal would add Reuters strength in sales and trading to Thomson8217;s base with money managers and investment bankers. The talks come amid a frenzy of dealmaking in the media sector. Last week Rupert Murdoch8217;s News Corp made a 5 billion bid for Wall Street Journal owner Dow Jones 038; Co Inc, which was rebuffed by Dow Jones8217; controlling investors.

Thomson and Reuters said they expected to make over 500 million of annual synergies within three years of completion of a deal, which could come this or next year. 8220;Although a rival bid cannot be ruled out, given the scale of synergies on offer and therefore healthy premium offered8230; we view Thomson as the bidder best placed to secure Reuters,8221; Numis Securities analysts wrote in a research note.

The combined Thomson Financial unit and Reuters financial and media businesses would be called Reuters, and adopt the Reuters trust principles aimed at protecting the independence of its news, the companies said. The Reuters Founders Share Co, run by 15 trustees, has a 8220;golden share8221; and could block a takeover. 8220;It should be emphasised that discussions are at a stage where there can be no assurance that an agreement will be reached. No transaction will be announced without the support of the Reuters Founders Share Company,8221; the companies said.

Long publishing pedigree

8226; The Thomson family bought its first newspaper in 1934 and built a publishing empire which for a time included The Times newspaper and Scottish Television. It branched into other fields, including creating a travel business that still bears its name, before focusing more recently on electronic publishing. It is in talks to sell its education unit, which analysts say could raise about 5 billion.

8226; Reuters was founded by German-born immigrant Paul Julius Reuter in 1851 when he opened an office to transmit stock market quotes between London and Paris via the new Calais-Dover cable.

8226; The Thomson family, which owns about 70 per cent of the Canadian group, would vote in favour of a deal with Reuters, the companies said. The family, through its Woodbridge vehicle, would own 53 per cent of Thomson-Reuters.

8226; Other Thomson shareholders would own 23 per cent of the combined business and Reuters shareholders would own 24 per cent. The deal is subject to approval by both sets of shareholders. Under the proposed deal, a so-called equalisation agreement would mean that both companies8217; primary listings would be maintained.