By Thomas Heath
Washington Post Staff Writer
Wednesday, May 16, 2007

Reuters Group, the 156-year-old news service, yesterday agreed to be acquired by Thomson Corp. in a $17.2 billion deal that creates a dominant financial information and news provider.

The size of the transaction would make the new company, which would rival Bloomberg in the lucrative financial services market, a potential target for U.S. and European regulators.

"It's something the Justice Department's antitrust division will be interested in looking at," department spokeswoman Gina Talamona said. She declined to comment further.

The terms of the transaction call for Thomson, based in Toronto, to swap 0.16 shares of Thomson Corp. stock and $7 in cash for each Reuters share. The $17.2 billion value that the deal places on Reuters is based on Monday's stock price. The deal was proposed May 4.

The firm, to be known as Thomson-Reuters Corp., would combine two legendary and profitable media companies. Reuters, which is headquartered in London and once used carrier pigeons to transmit news, has long been known for its coverage of world events and foreign-exchange markets.

Thomson, which is 70 percent owned by the Thomson family, the richest in Canada, transformed itself over the past two decades from a staid newspaper company that owned the Times of London into a highly profitable provider of cutting-edge data to the financial services industry. Thomson also sells specialized data to the tax, health-care, law and accounting professions.

Thomson-Reuters would have 50,000 employees to start and be run by Reuters's chief executive, Tom Glocer. The companies said yesterday that they expect more than $500 million a year in savings after three years. Shares of the company will be dual-listed and available for trading in Canada, the United States and Britain.

Corporate transactions involving a company with more than $100 million in net sales acquiring more than $50 million of stock in another company trigger an automatic filing with the Justice Department and the Federal Trade Commission, according to representatives of both agencies.

Once those papers are filed by Thomson and Reuters, a 30-day waiting period begins. The companies can request an early termination of the waiting period, allowing them to go ahead with the merger, or they can wait to see whether the investigating agency, in this case the Justice Department, has questions. If Justice requests more information about the proposed merger, another 30-day waiting period will begin, according to officials with the FTC and Justice Department.

David Anderson, who follows the financial information business as editor of London-based Inside Market Data Reference, said Bloomberg, the closely held private company founded by New York Mayor Michael R. Bloomberg, controls 30 percent of the financial data services business in North and South America. Thomson has 17 percent, Reuters has 13 percent, and the rest is divided among smaller entities. A Thomson-Reuters combination would nearly equal Bloomberg's market share.

Thomson-Reuters would combine for 37.6 percent in Europe's markets, eclipsing Bloomberg's European market share of 32.7 percent, according to Anderson.

Anderson said regulators are almost certain to approve the merger, "but the big question is: Will the combined entity be forced to divest itself of certain elements? Therein lies the tricky question."

Thomson last week announced it is selling its Thomson Learning division, which provides textbooks and online courses to government, companies and schools, for $7.75 billion.

Under Lord Kenneth Thomson of Fleet, a billionaire art collector who died last year at 82, the Thomson Corp. in the 1980s sold its North Sea oil holdings, and sold the Times to Rupert Murdoch's News Corp. and the Jerusalem Post to Conrad Black's Hollinger. Its Canadian flagship, the Globe and Mail, was combined with BCE's cable and television assets to form Bell Globemedia, controlled by BCE with Thomson as a minority shareholder.

The company then sold all of its community newspapers to become a financial data services giant.