Thomson to sell assets for $7.75 billion

/ Source: The Associated Press

The Thomson Corp., which has proposed paying more than $17 billion for British financial news provider Reuters Group PLC, freed up cash Friday by announcing that it agreed to sell education and publishing-related properties for $7.75 billion.

The agreement to sell Thomson Learning to two companies is seen as preparation for the company’s blockbuster proposal to purchase Reuters. The deal, disclosed last week, would make Thomson-Reuters the world’s leader in providing real-time data to traders and investment professionals.

Friday’s deal was “quite a bit more than was expected by most analysts. That should augur well for their bid for Reuters,” said John R. Kinsey, portfolio manager at Caldwell Securities in Toronto.

Thomson said Apax Partners, a private equity firm, and OMERS Capital Partners, an Ontario-based pension plan, are buying the higher-education, careers and library-reference divisions of Thomson Learning as well as Nelson Canada, an Ontario-based book publisher and provider of online resources.

The transaction is expected to close in the third quarter of this year and is subject to regulatory approvals.

Calls seeking comment from Apax and OMERS were not returned. A Thomson spokesman would not comment beyond the company’s news release.

Thomson had announced in October that it would sell Thomson Learning because it did not fit the company’s long-term strategic goals. That division alone was expected to bring in about $5 billion.

Thomson shares rose 3.6 percent to $42.02 Friday.

Thomson’s aggressive proposal for Reuters has caused the British company’s stock to spike. Thomson’s proposal of 352.5 pence ($7.03) per Reuters share in cash and 0.16 Thomson shares represented a 43 percent premium on what the stock was worth last week.

Reuters’ stock has since risen enough to narrow the premium to 15 percent.

Legal experts said a Thomson-Reuters combination — which would have a market capitalization of around $45 billion and a third of the global market for financial data terminals — would likely face tough antitrust scrutiny in the United States and Europe.

Reuters and Thomson rank second and third in the market for data terminals on desks at the world’s major banks and brokerages. Reuters was the leader for many years before being overtaken by Bloomberg LP, which has 33 percent market share, according to an April report from Inside Market Data Reference. Reuters held 23 percent and Thomson 11 percent.

Despite the likely concerns of antitrust officials, Bruce McDonald, a lawyer at Jones Day and former antitrust enforcer at the Department of Justice, said Thomson and Reuters could have some arguments in their favor.

Reuters and Thomson could argue that the combination would enable them to better compete against Bloomberg for higher-end customers that want a full package of financial data and tools, McDonald said. Bloomberg dominates that market while Thomson and Reuters compete more for midlevel customers.

The two companies could also argue that they compete in different markets, with Reuters more focused on Europe and Thomson stronger in North America, he said.

Nevertheless, the combination “will get a hard look by U.S. and EU antitrust enforcers,” McDonald said. The review in the United States would likely take six months or more, he said.

The companies have said the new company would retain its primary market listings in Toronto and London, but would be controlled by the Thomson family, which owns roughly 70 percent of the equity in Thomson Corp.