For Thomson empire, a $17-billion sale offers another shot at transformation

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There is some fortuitous timing that allows Thomson Reuters Corp. to extract a tidy sum from its steady, yet unspectacular, financial data business.

But for the 88-year-old Thomson media dynasty, led by chairman David Thomson, it also follows a pattern of rewriting the script every once in a while with a major deal. Newspapers, travel services, university textbooks, television networks, North Sea oil – all were once part of the empire and were sold off, usually at healthy prices.

Blackstone Group LP's deal to acquire 55 per cent of Thomson Reuters' financial and risk unit was four years in the making, according to Thomson chief executive officer Jim Smith. He explained on Tuesday that he spent that time making the business as efficient as possible as it fought for market share and struggled with slipping revenues.

Read more: Contacts and cost-cutting: How Blackstone will help Thomson Reuters revitalize unit

Read more: What analysts are saying about the Thomson Reuters-Blackstone deal

That work complete, he said, the business is ripe to be carved out and put into a partnership.

But bigger forces are at play. The transaction comes at a time when private-equity and pension funds are scrambling to find assets in a frothy market. Those are exactly the sort of conditions that savvy sellers enjoy.

A record US$1-trillion of private capital around the globe – so-called dry powder – is looking for stable returns. Blackstone and its partners, Canada Pension Plan Investment Board and Singapore sovereign wealth fund GIC, see great potential in the Thomson Reuters division that sends news and data to financial institutions, trading houses and investment funds.

The big funds will extract steady fees from the business's subscribers while looking for new ways to wrest market share from the industry's top dog, Bloomberg LP. Thomson Reuters, meanwhile, will hang on to minority ownership of 45 per cent, while taking away US$17-billion in pretax proceeds.

The Thomson family, which owns more than 63 per cent of Thomson Reuters through its holding company Woodbridge Co. Ltd., has done more than its share of transformational deals over the past quarter century. Its timing has been good for the most part, although not always.

Certainly, this week's deal helps to crystallize a fat return in the decade since Thomson Reuters was established. The Blackstone-led group is buying its portion of the financial and risk unit at pretty much the same valuation as the former Thomson Corp. paid to take over the venerable Reuters Group PLC. (And Thomson Reuters is keeping the Reuters news service in the bargain.) That 2008 merger offered the promise of a company that would be a fortified threat against Bloomberg and Dow Jones & Co. in the battle to supply the world's trading floors with market-moving news and data. It added Thomson's legal and other publishing assets to the mix. But the merged company slumped in its trading debut in April, 2008, as credit worries began to envelop the financial world and investors grumbled that the price now looked high. The business is dependent on global banks as major subscribers, and within months they were in the turmoil of an epic credit crisis. The financial industry shed tens of thousands of employees.

Even as the global economy began to recover, integration of the Thomson Reuters business was rocky. The stock slumped as initial sales of Eikon, the flagship data-delivery product, lagged expectations. This prompted management shakeups. By the end of 2011, Reuters veteran Thomas Glocer was replaced in the chief executive office by Mr. Smith, a one-time journalist who had worked in the Thomson organization since the 1980s.

It was during his stint at Thomson that the company shed all but one of its newspaper assets – the ones that made the company a global force – to focus on legal and professional publishing and electronic media. It had sold off most of the traditional print outlets by 2000, just before the onset of plummeting subscription and advertising revenues that have hammered the industry since. (Not long before that, Thomson also unloaded its Britain-based travel group and booked a healthy gain – and avoided the travel industry's post-9/11 disaster.)

The newspaper deals were the beginning of convergence, which was touted as the new media revolution. Woodbridge joined forces with BCE Inc., the country's biggest telecom company, to create Bell Globemedia. It brought together BCE's CTV network, The Globe and Mail and the Sympatico-Lycos internet business. Thomson had 30 per cent of the outfit. Five years later, BCE sold off the bulk of its interest in the partnership to the Ontario Teachers' Pension Plan and Woodbridge, and would later buy full ownership of CTV for $1.3-billion. BCE shovelled money into the operations, essentially buying CTV twice in a decade, while Woodbridge generated gains and wound up with control of The Globe, which it now owns outright.

Now, it seeks to get the best of both worlds with the Blackstone deal – taking a bundle of cash from the sale of the interest in business unit, while enjoying any rewards that the new, better funded, business can generate.