Thomson Reuters Corp debuted on Thursday as a top global information company, hoping a portfolio of products from financial to legal and health-care will help it ride out the finance industry downturn.
Shares in the company, formed by Thomson's more than $16 billion (Dh59 billion) cash and stock purchase of Reuters, fell to around 1,655 pence at midday in London. This is about a 12 per cent discount to the stock's closing price in Toronto on Wednesday.
Analysts had expected the London-listed Thomson Reuters shares to trade at a 15 per cent discount to the Toronto shares, citing the changing nature of the new company's shareholder base and the unwinding of arbitrage trades that had bet on Reuters shares rising to the Thomson offer price.
The combination allows Thomson to expand its financial data offering from its North American base, blending Reuters trading business with Thomson's money manager activities. It's also meant to help Reuters cut its exposure to financial markets, recently buffeted by credit crises.
Even so, brokerage ABN began its coverage of the new company with a "sell" rating on the stock, arguing the financial industry is bracing for big job cuts and takeovers.
"This is not a helpful backdrop for the market-data industry, which accounts for 60 per cent of Thomson Reuters' proforma revenue and is a fixed cost business," ABN's media team said.
Thomson Reuters, headed by former Reuters chief Tom Glocer, sells electronic news and data to traders, fund managers and analysts, as well as databases and other information to lawyers, accountants, scientists and the health-care industry.
Dealings in Thomson Reuters, which announced it may buy back up to $500 million (Dh1.84 billion) of its shares over the year, start later in Toronto and New York.
Thomson's publishing roots date back to 1934 when Toronto native Roy Thomson bought The Timmins Press in Northern Ontario. The Thomson family has since been involved in textbook and newspaper publishing, at one point owning the Times of London.
Thomson sold The Times in 1981 and sharpened its focus on data publishing when it sold its North Sea oil interests in 1989 and Thomson Travel in 1998 and education business last year.
Reuters started in 1851 when German-born Paul Julius Reuter transmitted stock market quotes between London and Paris on the Calais-Dover cable. Before that, he used pigeons to fly stock prices between Aachen in Germany and Brussels.
This was the beginning of the Reuters news service, which now has 2,400 journalists and became the foundation for a $5 billion-a-year (Dh18.4 billion) news and financial data empire.
The new company, with headquarters in New York, has annual revenues of $12.5 billion (Dh46 billion), 50,000 employees and more than 40,000 customers in 155 countries.
Glocer, a former mergers and acquisitions lawyer, envisions a company that will provide "intelligent information" that people will pay for, he told Reuters in an interview.
"It's not just: 'Isn't it nice that instead of Reuters having 90 per cent-plus concentration in financial, there'll be a more hedged, balanced portfolio," he said.
"What I think is more interesting is all of these units are going to work together over the long haul."
The newly formed company's markets division with $7.4 billion (Dh27.23 billion) in annual sales competes with Bloomberg LP for financial industry clients.
Bloomberg and Thomson Reuters each have about a third of the global financial data market, according to Atradia Consulting Director David Anderson.
Rivals also include Dow Jones Co, now a unit of Rupert Murdoch's News Corp, and Anglo-Dutch publisher Reed Elsevier. Reed owns the LexisNexis legal database, a competing offering to Thomson's Westlaw, and competes with the company's $5.1 billion-a-year professional division.
The credit crisis, a possible economic downturn and meltdowns among investment banks such as Bear Stearns could hurt providers of financial data tools and products.
"A growing number of brokers, dealers, traders and banking staff will be sacked," Atradia's Anderson said.
The City of London alone could lose 40,000 jobs because of fallout from the US sub-prime crisis and global credit crunch, according to JPMorgan.
Glocer, on the other hand, said the company was benefiting from hot demand for foreign exchange and energy data and was less exposed to problem areas like mortgage desks than rivals.
The group's first-quarter results next month will provide the first opportunity for a "candid outlook" for the enlarged group, Credit Suisse said. Before then, investors will be wary of any analyst earnings downgrades, particularly amid the unwinding of arbitrage trades between the London and Toronto traded shares.
The company's immediate priority is to marry the Reuters array of financial products, such as the flagship 3000Xtra, with Thomson's products, such as ThomsonONE, which includes FirstCall company profit estimates.
Down the road, the challenge will be to integrate the financial products with the professional services. (Reuters)
Thomson Reuters debuts amid global market jitters