Thomson, the Canadian electronic media firm, has agreed to buy Reuters for about £8.7bn to create the world's biggest financial news and data group, both companies announced yesterday in statement to the London Stock Exchange.
The two companies will join forces under the name Thomson-Reuters after the takeover clears regulatory hurdles in North America and Europe and wins shareholder approval.
The deal has the support of the Reuters Founders Share Company, which has the power to block a change of ownership.
Thomson said it would do what was required to win approval from competition watchdogs. Reuters chief executive Tom Glocer, who will head the combined group, would not predict how long the process would take but said disposals may not be needed.
"I would not expect that we would need to make any divestitures," he said.
Thomson and Reuters said the combination is a natural fit across geography and products, bringing together Reuters strength in real-time data and news with Thomson's historical information.
"We're creating a new force in a world of multiple information sources," Glocer said.
For Thomson, the combination of the two groups adds clout to its financial services business. For Reuters, it reduces exposure to cyclical financial services.
The Thomson family, which owns 70% of Thomson Corp via its Woodbridge holding company, backs the takeover and some Reuters investors have said the offer of 352p and 0.16 Thomson shares for each Reuters share is fair.
At Monday's closing prices, the offer is worth 692p per share. Reuters shares gained 3% or 20.5p to 626p by close of London dealing.
"We think 5% is justified by timing issues and the fact that the UK quote will probably trade at a discount to the US quote; the rest is explained by anti-trust issues," said ABN Amro analyst Paul Gooden.
Glocer said Thomson-Reuters will have revenues of more than $11bn, 60% from its financial information and news business, to be called Reuters, and 40% from its law, tax and science markets, to be called Thomson-Reuters Professional.
With 34% of the financial information market, it will overtake Bloomberg, which has 33%, according to industry newsletter Inside Market Data.
Thomson has been building its financial data business and sold its education unit for $7.75bn in cash last week to help finance the Reuters deal.
Woodbridge will own 53% of Thomson-Reuters and support the Reuters Trust principles of integrity, independence and freedom from bias.
Unions representing Reuters staff in Britain, Canada and the United States wrote to the Reuters Founders Share Company on Monday expressing concern about the impact a single controlling shareholder could have on Reuters news values, which emphasise unbiased reporting.
Woodbridge will be granted an exemption to the 15% shareholding limit set by the Reuters Trust principles as long as it remains controlled by the Thomson family.
Reuters chief operating officer Devin Wenig will become chief executive of the new Reuters while Thomson chief operating officer Jim Smith will be chief executive of Thomson-Reuters Professional. Thomson chief financial officer Bob Daleo will be chief financial officer of Thomson-Reuters.
The companies expect to make more than $500m (about £250m) of annual savings within three years of completion of the deal.
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