Reuters Stock Rises on Buyout Offer

After Rupert Murdoch made his bid for Dow Jones & Co., it seemed logical for Reuters to find itself the target of a takeover offer. The Toronto Globe and Mail says the suitor is Thomson Corp. Reuters isn’t saying, but Thomson hasn’t denied anything. Reuters stock rose almost 27% on the news, and more is likely.

In a statement, Reuters did say, “The board of Reuters confirms it has received a preliminary approach from a third party which may or may not lead to an offer being made for Reuters. There is no certainty an offer will be made or necessary approvals, including those required under Reuters constitution, will be received.” Reuters constitution is an interesting device, since there is a single golden share held by the Reuters Founder Share Co., whose 15 trustees are charged with maintaining the organization’s “independence, impartiality, integrity and freedom from bias.” That single share provides a veto. Needless to say, a bid from Mr. Murdoch would fail at this gate.

Nevertheless, the golden share would only come into play in the event of a hostile bid. A friendly offer would be another story altogether. Hence, the speculation that Thomson is the suitor. The company has been building up its news deliver systems, and Reuters would fit nicely within that.

Last year, Thomson bought London-based AFX news for about US$20 million. This was a precursor to the launch of Thomson’s own branded service. It’s much easier to buy Reuters and slap the Thomson name on it than it is to start a Thomson service up from not-quite scratch.

Another indicator that Thomson is the bidder is the pending sale of its College Education business, for which it may get $5 billion. That’s about one-third of what most believe Reuters’ value to be – certainly enough for a down payment in a cash-and-shares offer.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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