Blackstone agrees to $20bn Thomson Reuters unit takeover

A group led by Blackstone Group agreed to buy a majority stake in Thomson Reuters’ financial and risk (F&R) unit in a deal that values the business at $20 billion, sealing plans for the firm’s biggest buyout in a decade.

Canada Pension Plan Investment Board and Singapore's sovereign wealth fund, GIC, will co-invest alongside Blackstone to acquire 55 per cent of the business, according to a statement. Thomson Reuters will retain a 45 per cent equity stake. The unit, which provides data, analytics and trading to Wall Street and financial professionals around the world, does not include the news-gathering operation.

“We are delighted to partner with Thomson Reuters in continuing to grow the financial and risk business,” Joe Baratta, Blackstone’s global head of private equity, said in the statement. “This is a landmark transaction for Blackstone and our investment partners.”

Thomson Reuters said it will receive about $17bn in proceeds, consisting of $3bn from the Blackstone-led group and $14bn in debt and preferred equity. The company will use the money to repay debt, establish a new standalone company, pursue organic growth and M&A and repurchase stock, according to the statement.

The new company also entered a 30-year agreement to pay Reuters News at least $325 million a year for its news and editorial content, according to the statement.

Bank of America, Citigroup and JPMorgan will provide debt financing for the deal. The package will include leveraged loans and high-yield bonds denominated mostly in dollars, people with knowledge of the matter said earlier.

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Blackstone sees attractive growth in the Thomson Reuters unit’s data feed, its foreign exchange and treasury trading platforms, as well as its risk and compliance business, a person familiar with the matter said before the deal was announced. The division would also be able to improve operations more quickly as a private company, the person said. The F&R unit accounted for more than half of adjusted earnings before interest, taxes, depreciation and amortization in 2016.

“Blackstone’s strong relationships in the financial services industry and long and successful history of corporate partnerships will help F&R provide new and innovative products and services,” said Jim Smith, president and chief executive of Thomson Reuters.

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.

The transaction, Blackstone's biggest by enterprise value since the firm's $26bn buyout of Hilton Worldwide, harks back to private equity's so-called Golden Age, when firms bought about 20 supersized companies from 2005 to 2007. It will add to the $105bn of private equity deals targeting the media and technology industries over the past 12 months, according to data compiled by Bloomberg.

“There is undoubtedly a lot of dry powder in the market at the moment,” said Andrew Adams, chief executive at Quayle Munro, a UK-based M&A advisory firm. “Valuations will continue to remain strong, especially for high quality assets in attractive markets such as fintech information.”

The Thomson Reuters deal will be done by Blackstone’s private equity unit, which is in the process of deploying an $18bn fund. It is expected to close in the second half of 2018.

“We would be very surprised if this deal didn’t signal an acceleration of M&A activity in what has always been a busy sector,” Mr Adams said.

Canson Capital Partners, Bank of America, Citigroup and JPMorgan were financial advisers to the Blackstone-led consortium, with Simpson Thacher & Bartlett providing legal advice. Guggenheim Securities, TD Securities and Centerview Partners advised Thomson Reuters.