Thomson Reuters sells stake in F&R business to Blackstone-led consortium

April 2018 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

April 2018 Issue

A consortium led by US private equity firm Blackstone Group LP announced that it has entered into a partnership agreement to buy a majority stake in the financial and risk (F&R) business of Thomson Reuters Corporation. The transaction values the F&R business at approximately $20bn.

Under a definitive agreement, private equity funds managed by the Blackstone-led consortium, which includes the Canada Pension Plan Investment Board (CPPIB) and GIC, will own 55 percent of the equity in a new corporation created to hold the F&R business, with Thomson Reuters retaining a 45 percent equity stake. The businesses that will comprise the new F&R partnership had 2017 revenues of approximately $6bn.

Additionally, Thomson Reuters will receive approximately $17bn in gross proceeds at closing – subject to purchase price adjustments – funded by $14bn of debt and preferred equity to be incurred by the partnership and a $3bn cash equity contribution by Blackstone. Thomson Reuters will also maintain full ownership of its legal, tax and accounting and the Reuters news businesses.

A world-leading data and financial technology platform, Thomson Reuters provides critical information and data analytics, enables financial transactions and connects communities of trading, investment, financial and corporate professionals. It also provides leading regulatory and risk management solutions to help customers anticipate and manage risk and compliance.

“This deal strengthens F&R and should accelerate its growth and benefit its customers across the sell-side, buy-side and trading venues,” said Jim Smith, president and chief executive of Thomson Reuters. “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, drive further efficiencies and navigate ongoing industry consolidation.”

The new partnership will be managed by a 10-person board composed of five representatives from Blackstone and four from Thomson Reuters. The president and chief executive of the new partnership will serve as a non-voting member of the board following the closing of the transaction.

“We are excited to partner with Thomson Reuters – one of the most trusted companies in financial technology,” said Martin Brand, a senior managing director at Blackstone. “The F&R 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 provides an opportunity to increase efficiency and accelerate revenue growth through innovation and focus on creating uniquely compelling products for F&R’s customers.”

Acting as financial advisers to the Blackstone-led consortium are Canson Capital Partners, BofA Merrill Lynch, Citigroup and J.P. Morgan, with Simpson Thacher & Bartlett LLP acting as legal counsel. Debt financing related to the transaction is being provided by J.P. Morgan, BofA Merrill Lynch and Citigroup. Dechert LLP is acting as legal counsel to GIC.

For Thomson Reuters, Guggenheim Securities, LLC, TD Securities Inc. and Centerview Partners LLC are serving as advisers. Wachtell, Lipton, Rosen & Katz is serving as legal counsel for the transaction, with Torys LLP serving as Canadian legal counsel and Norton Rose Fulbright serving as legal counsel to the Thomson Reuters Founders Share Company.

The acquisition is subject to specified regulatory approvals and customary closing conditions, including the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act.

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

The transaction is expected to close in the second half of 2018.

Fraser Tennant