US private equity firm Blackstone Group LP catapulted itself into the major leagues of Wall Street’s financial information industry with the acquisition of a majority stake in the Financial and Risk business of Thomson Reuters Corp.
The $20 billion deal is Blackstone’s biggest bet since the financial crisis and pits co-founder Stephen Schwarzman against fellow billionaire and former New York Mayor Michael Bloomberg.
Bloomberg’s eponymous terminals are the market leader in providing traders, bankers and investors with news, data and analytics.
Blackstone will acquire a 55 percent stake in a newly hived off F&R business, a statement from both companies said. Thomson Reuters will retain a 45 percent 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 companies said.
The deal will give Thomson Reuters, controlled by Canada’s Thomson family, a formidable ally as it seeks to reinvigorate a business facing challenges from a shrinking and budget-conscious customer base.
Blackstone has a track record of cutting costs and, as one of the world’s biggest investors, it has business relationships with most of the major banks on Wall Street that are clients for Thomson Reuters’ flagship desktop product Eikon.
The Canada Pension Plan Investment Board and Singapore’s GIC will invest alongside Blackstone. The amount they will provide was not revealed. The Canada Pension Plan Investment Board declined to comment. A spokeswoman for GIC declined to comment.
Talks on a possible deal began in earnest last summer, two sources familiar with the negotiations told Reuters.
The partnership will be managed by a 10-person board composed of five representatives from Blackstone and four from Thomson Reuters. The President and CEO of the new partnership will serve as a non-voting member of the board following the closing of the transaction. The companies did not say who that person would be.
Thomson Reuters 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.
As talks between the two sides intensified, the biggest sticking point had been what the partnership would mean for Reuters News, the international news agency, which supplies the Eikon terminal with headlines, stories and analysis, said the two sources, who spoke on condition of anonymity.
The new F&R company will make minimum annual payments of $325 million to Reuters 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.
Thomson Reuters Chief Financial Officer Stephane Bello told an investor call that the payment represented what F&R used to allocate to Reuters News, plus “a tiny bit more”.
