This CDS report was written by Markit’s Gavan Nolan
Credit markets proved resistant to bullish sentiment in the equity markets today and continued to widen. Credit investors have been taking profits after the recent rally and didn’t see yesterday’s widening as an opportunity to take long risk positions. The Markit iTraxx Europe index was trading around 92bp, over 1bp wider than yesterday’s close. It was trading even wider earlier in the session but recovered some ground after a dovish Bank of England inflation report and a solid US opening. The Markit iTraxx HiVol and Crossover indices widened to 171.5bp and 613bp respectively.
Widening names comfortably outnumbered tightening credits. Nestle, one of the strongest names in Europe, was among the worst performers despite posting better than expected results. The Swiss food company said net profit for the first-half was CHF5.1 billion, ahead of consensus estimates. Rising operating margins were also welcomed by investors. But its sales growth came in below estimates and the firm dropped its full-year forecast. It was a similar story at US rival Sara Lee. The firm’s earnings beat expectations but its revenue figures and full-year forecast disappointed the markets. Both firms are stellar credits are are expected to remain so, with implied AA credit ratings. However, the official ratings are quite different, with Nestle – a former holder of the universal AAA rating – at AA, while Sara Lee is BBB. Read more
Bloomberg, the privately owned news and information company, will expand its 2,300-strong news operation by more than 10 per cent this year as news plays a growing role in the content on the electronic system. The plans to add at least 240 more reporters in 2007 shed light on Bloomberg’s strategy for maintaining an edge over rivals Reuters and Thomson, which have agreed an $18bn merger. In addition, if Rupert Murdoch’s News Corp succeeds in its $5bn bid for Dow Jones, owner of the Wall Street Journal, Mr Murdoch has promised to increase staff levels in Washington as well as in Asia and Europe.
The Thomson family may have to vote its stake in the new Thomson Reuters in line with the Reuters Founders Share Company’s wishes, it emerged on Wednesday, as the body’s chairman gave his first explanation of why it waived its rules to allow the deal to go ahead. Pehr Gyllenhammar, chairman of the FSC trustees, said Thomson had agreed “to vote as we direct them” on any matter the trustees deem threatening to the five Reuters Trust principles that protect Reuters’ editorial independence. Niall FitzGerald, chairman of Reuters, said on Tuesday that jobs would be allocated to “the best in class” from each firm but executives from both are expected to look for jobs elsewhere.
Thomson Corporation and Reuters on Tuesday urged regulators to take a broad view of the “dynamic” market for financial data, but predicted it could take up to a year to complete their £8.7bn plan to seize the market lead from Bloomberg. The two companies unveiled detailed plans of Thomson’s cash-and-shares offer for Reuters after securing the “hearty endorsement” of the [Reuters] Founders Share Company. Reuters shares closed at 626p, up 20.5p but still 9 per cent below the value of Thomson’s offer as investors expressed concern about regulatory risk. Thomson certainly knows how to sell businesses, says Lex, noting the $8bn it raked in for its education arm last week. But is it equally adept at buying businesses? With formidable regulatory hurdles to clear, just joining the two businesses together is a daunting challenge for a team that appears competent but not brilliant. Compared with this, Thomson’s previous experience of buying and selling businesses was child’s play.
LONDON, May 15 (Reuters) – Canadian publisher Thomson Corp, owner of a rival to this news-wire, has agreed to buy Reuters, which owns this news-wire.
The £8.7bn offer would create the world’s biggest financial news and data group to rival Dow Jones, owner of Dow Jones Newswires, another rival of this service; the Wall Street Journal, which uses Thomson data and whose website competes with Reuters’ online clients; Factiva, a former joint venture with Reuters that still carries content from this and other news services and is available via Reuters’ screens; and other newspapers that are customers of Reuters. Read more
Reuters terminals across the world will be churning out details of fresh ownership at the 150-year-old news and data service on Tuesday as the boards of Reuters and Thomson agree to combine their businesses.
So, what are the numbers? Read more
Unions representing Reuters staff in the UK, US and Canada have expressed “deep concerns” about Thomson’s £8bn bid in a letter to the Reuters Founders Share Company, the body which could decide whether the bid succeeds. The influential group, chaired by Swedish industrialist Pehr Gyllenhammar, is expected to meet this week. Although Mr Gyllenhammar has said its “golden share” in Reuters is “not a poison pill”, it could block any bid it considers would jeopardise the integrity and independence of the company’s news wire service. Five unions representing journalists, technical staff and other employees drew attention to the Reuters constitution, which states that “no person may be interested in 15 per cent or more of Reuters issued shares”.
The Reuters Founders Share Company, the trust that acts as guardian to the editorial independence of Reuters Group, is set to back the proposed takeover of the media group by Canada’s Thomson Corp, reported the Independent on Sunday [via Reuters]. A formal announcement by Thomson and Reuters could be made as early as this week, the paper noted. The FT reported at the weekend that Thomson Corp agreed on Friday to sell its education publishing division for $7.75bn (£3.9bn) in cash, boosting the Canadian electronic publishing group’s ability to finance a bid for British rival Reuters. As part of its May 7 offer for Reuters, Thomson would need about $8.75bn in cash. Apax Partners and the Ontario Municipal Employees Retirement System were the winning bidders for Thomson’s educational publishing arm. The deal prompted renewed buying in Thomson and Reuters shares, affected over the past few days by concerns over regulatory and operational risks associated with the merger. Lex, meanwhile, asks whether big banks and other customers for financial information have justifiable concerns about reduced competition from a merged Thomson-Reuters. And the FT’s media editor examines the Thomson family empire.
This Thomson/Reuters merger is looking more like a done deal with every passing day. At least “done” in every aspect other than regulatory clearance.
Six months after announcing that it planned to sell its education division, Thomson on Friday said it had reached a $7.75bn disposal deal with a consortium led by buyout firm Apax Partners and OMERS Capital Partners, part of a Canadian pension fund. When the business, known as Thomson Learning, was first put on the block the mooted price tag was just $5bn. Read more
Concerns about the regulatory and integration challenges of Thomson Corporation’s £8bn bid for Reuters weighed on both companies’ shares on Wednesday as it emerged that the Thomson family intends to take direct control of the merged group. Shares in Reuters slipped 2.9 per cent to 612p, erasing Tuesday’s gains, while Thomson experienced a smaller fall of 1.4 per cent to $40.71 at lunchtime in New York. Thomson and Reuters would not comment but it is understood that David Thomson, who took over the family empire after his father’s death last year, would chair the combined group. Analysts, meanwhile, have warned that regulatory scrutiny could delay completion of the deal until early 2008 – just one of several downsides to the deal, warns Breaking Views..
Reuters executives have begun the task of trying to persuade the group that guards the company’s editorial independence to allow an £8bn takeover by Thomson Corporation, even as commentators focused on the issue of whether Thomson is over-paying for Reuters. Thomson shares slid 3 per cent to C$45.73 by lunchtime in Toronto after the group said its offer would be half in cash and half in paper, giving the Thomson family a 53 per cent holding in the merged group. The offer valued Reuters on Tuesday night at just over £8.1bn. ValueAct Capital, Reuters’ second-largest shareholder, said it believed Thomson’s offer was “fair”. Reuters shares closed at 630p, up 2.3 per cent but below the day’s peak of 660p, as analysts said they expected competition and tax issues, as well as the need to secure approval from shareholders and the Reuters Founders Share Company, could delay completion of a deal until early next year. Lex, meanwhile, notes that Reuters’ share price is still 8 per cent below the implied offer price and asks whether this reflects doubts that an agreement can be reached, while Reuters reported that arbitrage traders said the shares were pricing in a risk that a deal would not happen.
Those intrigued by news that Thomson and Reuters are discussing a dual listed structure for their planned merger should read a handy little guide prepared by the FT’s Maggie Urry.
They’re not as novel as some M&A youngsters might think, offering a way to form a single operational business while retaining separate shareholder bodies. Think Carnival, BHP Billiton and, of course, Unilever.
The Reuters chief executive’s memo to staff on Tuesday…
This morning we confirmed that we are in talks to combine Reuters with Thomson Corporation. We made this announcement because there was significant speculation in the market as to the identity and terms of a possible combination, and we felt this was the right thing to do for our staff, our customers and our shareholders. Because the statement is quite comprehensive for this stage of the proposed transaction and there is still some way to go, there is little more I can add at the moment.
I strongly believe that in combining our two companies we would create a world leader in electronic media and publishing. The new organisation would be called Thomson-Reuters, and the combined Thomson Financial unit and Reuters financial and media business would be called Reuters. Read more
Takeover talks between Thomson Corporation and Reuters were clearly much more advanced than was generally realised on Friday, when news of discussions leaked, sending Reuters’stock hurtling higher.
On Tuesday, while warning that this was a complex transaction that could yet fail to materialise, a joint statement from the two companies set out their plans in some detail. Here are the snaps:
Investment banks could play an important role in deciding the regulatory fate of the proposed £8.8bn tie-up between Reuters and Thomson Corporation, amid concerns that combining two major financial data companies will be anti-competitive, the Guardian reports. Reuters and Thomson control a combined 34 per cent of the financial data market, which would put them just ahead of the industry-leading Bloomberg, which has a 33 per cent share. The FT, meanwhile, says that analysts predict that Thomson will have to offer about 650p-700p per share to secure the agreement of the Reuters board. Separately, the Sunday Telegraph reported that Reuters has been working for two years on a deal with Thomson, and that the UK group’s chief executive Tom Glocer is expected to be offered a prominent role if their union goes ahead. It is understood that various combinations have been discussed over time, including the sale of Thomson’s financial information arm to Reuters. That idea was shelved when the Canadian group realised it would incur a major tax charge.
Faced with a share price ratcheting higher, Reuters issued a statement mid-morning on Friday confirming that it has received a preliminary takeover approach.
There was no further detail. Shares in Reuters immediately ran through 600p in chaotic trade.
But since the “usually knowledgeable sources” who alerted us to the fact that Reuters was in play seem to be plain “knowledgeable” on this one, we should report what they are saying. Read more
Maybe it’s bid fever, or maybe the chatter has some real substance: word in the London market on Friday had it that Reuters is about to announce that it has received a £7.5bn takeover offer from rival Thomson, pitched at 600p-per-share.
Shares in Reuters jumped 36p to 529p during early trade on the LSE. Read more
April was a record month for M&A, no matter whose data you choose to read. Mergermarket, the financial news and data business, newly part of the Financial Times Group, calculates $482.6bn worth of M&A activity during the month, while Thomson puts the figure at a whopping $626.3bn.
So why the $150bn difference? Not exactly small change is it…. Read more