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Blackstone bets big on Wall St information biz with Thomson Reuters deal

The partnership will be managed by a 10-person board composed of five representatives from Blackstone and four from Thomson Reuters

Reuters  |  London/New York 

Blackstone

US firm Group LP catapulted itself into the major leagues of Wall Street's financial information industry on Tuesday with the acquisition of a majority stake in the Financial and Risk of Corp.

The $20 billion deal is Blackstone's biggest bet since the financial against fellow billionaire and former Bloomberg's eponymous terminals are the in providing traders, bankers and investors with news, data and analytics.

will acquire a 55 per cent stake in a newly hived off F&R business, a statement from both said. will retain a 45 per cent holding and will receive approximately $17 billion, including about $3 billion in cash and $14 billion of debt and preferred equity issued by the new business, the said.

The deal will give Reuters, controlled by Canada's family, a formidable ally as it seeks to reinvigorate a facing challenges from a shrinking and budget-conscious customer base.

has a track record of cutting costs and, as one of the world's biggest investors, it has relationships with most of the major banks on Wall Street that are clients for Reuters' flagship

The Pension Plan Investment Board and Singapore's will invest alongside The amount they will provide was not revealed. The Pension Plan Investment Board declined to comment. A for declined to comment.

Talks on a possible deal began in earnest last summer, two sources familiar with the negotiations said.

The partnership will be managed by a 10-person board composed of five representatives from and four from The of the new partnership will serve as a non-voting member of the board following the closing of the transaction. The did not say who that person would be.

has relied heavily on cost-cutting in recent years as its core customers, including banks, brokerages and investment houses, retrench in the face of weak trading conditions, tougher regulations and the rise of passive investing.

US-listed shares of were up 2.2 per cent at $47.52 in extended trading, after rising 7.1 per cent in the regular session, while shares of were down 0.2 per cent after the bell.

Trust principles

As talks between the two sides intensified, the biggest sticking point had been what the partnership would mean for News, the news agency, which supplies the terminal with headlines, stories and analysis, said the two sources, who spoke on condition of anonymity.

One issue centered around the Trust Principles, which commits to preserving its "independence, integrity, and freedom from bias" in supplying news.

In an interview, Kim Williams, of the Founders Share Company, said "we are satisfied that the nature of the contract ensures that appropriate quality of editorial is sustained."

In its statement, and the Founders Share Co, which has overseen Reuters' editorial independence since the company was first publicly listed in the 1980s, cited "consequential modifications" to what it described as the Trust Principles "arrangements." The changes were not spelled out.

Until now, the principles have applied not just to News but to all units.

said in an interview that the partnership with required clarifying where the Trust Principles apply.

Under the deal with Blackstone, "The Trust Principles apply any place where we use the brand or a third party uses the brand in a product," Smith said.

News will remain part of Reuters, along with its Legal and Tax and Accounting divisions.

The new will make minimum annual payments of $325 million to over 30 years to secure access to its news service, equating to almost $10 billion.

The payments will be adjusted for inflation, company executives said.

told an investor call that the payment represented what F&R used to allocate to News, plus "a tiny bit more".

After the deal, News will have about $625 million in revenues, including the annual payment from F&R and about $300 million in revenues from its business, slightly higher than its cost base, Bello said.

Williams said that an advantage of the deal was that will move "from being a cost center inside to being a full operating unit with its own profit and loss accounts."

expects the transaction to close in the second half of 2018. The company said on Tuesday it expected 2017 results, which it will release next month, to meet or exceed guidance, with revenues expected to rise by one per cent.

family

The proceeds of $17 billion that will glean from the deal match the amount that Corp, controlled by the family, paid for London-based in 2008. That deal created the Group.

The company plans to use $9 billion to $10 billion to buy back shares, and use the rest to pay down debt, invest in its Legal and units and make selective acquisitions.

Woodbridge, the family's investment company, will take part in the share repurchase, maintaining its ownership in in the 50 to 60 per cent range. Woodbridge, which currently owns 64 pct of Reuters, could not immediately be reached to comment on the deal.

Over the past six years, the family has been making divestments, reducing the number of products within the F&R segment by about 70 per cent since 2012, while shrinking the division's workforce by 25 per cent, according to Morningstar Equity Research. Smith told an investor call that there was room for more cost cuts in the new F&R

has also sought to sell non-core assets, such as its intellectual property and science business, which it sold to firms and Baring Asia for $3.55 billion in 2016.

First Published: Wed, January 31 2018. 12:08 IST
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