Blackstone in talks to buy Thomson Reuters' financial unit

[SHANGHAI] Blackstone Group is in talks to buy a controlling stake in Thomson Reuters's key business that supplies data, news and analytics to Wall Street and financial professionals around the world.

The discussions are about a "potential partnership" in the financial and risk division, which had US$6.1 billion in revenue in 2016, according to a statement late Monday from the Toronto, Canada-based Thomson Reuters. Blackstone is in talks to buy about 55 per cent of the business, according to a person familiar with the buyer. The entire unit has a total valuation of about US$20 billion, the person said. Blackstone declined to comment.

Buying a stake in the financial and risk business would increase Blackstone's exposure in the market for financial data. Blackstone already owns the financial-technology firm Ipreo Holdings, which it purchased together with Goldman Sachs Group's merchant-banking arm for US$975 million in 2014. A potential sale of the business will be one of the biggest restructurings of Thomson Reuters since Canada's Thomson took over the London-based Reuters about a decade back.

Bloomberg, the parent company of Bloomberg News, competes with Thomson Reuters in providing news, data and information to the financial industry. Peter Grauer, chairman of Bloomberg, is a non-executive director at Blackstone.

Blackstone's investment, if finalised, will put the buyout firm in direct competition with Bloomberg as well as News Corp's Dow Jones division in selling data services, analytical and trading tools to Wall Street.

"As part of any proposed partnership, Thomson Reuters would retain a significant interest in the F&R business and would retain full ownership of its legal, tax & accounting and Reuters News businesses," Thomson Reuters said in the statement.

Thomson Reuters' Financial & Risk unit includes Eikon, its flagship terminal that provides data, analytics and trading platforms for financial industry professionals. The unit also sells regulatory and risk management solutions to customers. Some 77 per cent per cent of the unit's US$6.1 billion revenue came from subscriptions to its products and 15 per cent from transaction fees.

Thomson Reuters shares hit an all-time closing high of US$48.06 in October, but they've declined 9.6 per cent since then, dragged down after third-quarter revenue missed analysts' estimates. Thomson Reuters has a market value for $30.8 billion. Chief executive officer James Smith attributed that shortfall to potential customers delaying decisions amid regulatory changes resulting from the European Union's Markets in Financial Instruments Directive, or MiFID II.

In 2012, Thomson Reuters sold its healthcare unit, which provided data and analysis to hospitals, government agencies and employers, to Veritas Capital for $1.25 billion. In 2016, it offloaded its intellectual property and science division to Onex Corp and Baring Private Equity Asia for US$3.55 billion.

The division for sale makes up about half of the company's profit. Any transaction deal would add to the US$105 billion of private-equity deals targeting the media and technology industries over the past 12 months, according to data compiled by Bloomberg. The board of Thomson Reuters is expected to meet on Tuesday to discuss the deal, according to the Reuters report.

Thomson Reuters is controlled by Woodbridge Co, an Ontario, Canada-based holding company that manages the assets of the Thomson family. According to a regulatory filing last month, Woodbridge holds 63.6 per cent of Thomson Reuters shares. The Thomsons, descended from company founder Roy Thomson, remain some of the richest people in Canada.

BLOOMBERG