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The Deal is Done – Blackstone to Take 55% stake in Thomson Reuters Financial and Risk Business

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The deal is done, Thomson Reuters yesterday signed a definitive agreement to enter into a strategic partnership with Blackstone that will give the private equity firm a 55% stake and Thomson Reuters a 45% stake in the company’s financial and risk business. The agreement also spelled out the future for Reuters News, which after the deal is closed, will remain within Thomson Reuters and receive a minimum of $325 million a year for 30 years to cover provision of news and editorial content to the financial and risk joint venture.

The transaction values the financial and risk business at about $20 billion and is expected to close in the second half of this year. Talks are believed to have started last summer, after Thomson Reuters reorganised and eliminated 2,000 jobs, many among the middle management of the financial and risk business, in late 2016.

The new business will be managed by a 10-person board composed of five representatives from Blackstone and four from Thomson Reuters, none of whom have yet been named. The president and CEO of the company will serve as a non-voting member of the board. Canada Pension Plan Investment Board and GIC will invest alongside Blackstone, but have not detailed their involvement.

The financial and risk business, which has struggled to pay its way in a highly competitive market characterised by increasingly cost-conscious clients, is expected to face a further shake-up as Blackstone looks to cut costs, increase efficiency and push the business forward.

Martin Brand, a senior managing director at Blackstone, said: “The financial and risk division has tremendous assets, including a world-leading data business, essential risk and compliance solutions, OTC trading venues, wealth management software, and a strong desktop business. The partnership with Blackstone provides an opportunity to increase efficiency and accelerate revenue growth through innovation and focus on creating uniquely compelling products for customers.”

Thomson Reuters will receive about $17 billion when the transaction closes and will maintain full ownership of Reuters News and the legal, tax and accounting business. It will use the proceeds of the transaction to pay down debt, repurchase shares and pursue organic and acquired growth. The company is also expecting to benefit from its 45% interest in financial and risk over time.

The Thomson Reuters Founders Share Company, which could have derailed the breakup of Thomson Reuters, has agreed to make consequential modifications to the Trust Principles arrangements on closing to reflect the transaction. Jim Smith, president and CEO of Thomson Reuters, said: “Reuters News will maintain complete editorial freedom and continue to operate under the Trust Principles. There has never been a more important time for providing trusted news and that is what Reuters will continue to deliver on with accuracy and integrity.”

The transaction was announced on the same day as Thomson Reuters said it expects full-year 2017 revenue to rise 1% to between $11.3 billion and $11.35 billion, and operating profit to rise 25% to between $1.74 billion and $1.76 billion. Full results will be released on February 8, 2018.

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