By combining with Reuters, Thomson would be in a position to top Bloomberg in this lucrative market niche. Thomson has transformed itself in the last decade from an owner of newspapers and other print products. It has built up its legal information business, and is about to sell Thomson Learning, its book division, for about $5 billion.
Chief Executive Officer Tom Glocer said in a note to Reuters staff that he could say little about the approach. "However, I want you to know that in considering this proposal I and my colleagues on the Reuters board will be guided by what is in the best interest of Reuters and its stakeholders, including employees," he said.
Jason Stewart, a spokesman for Thomson at its Stamford, Conn., headquarters, said Friday the company will not comment "on rumors or speculation."
Reuters' constitution, set when the company floated shares in London and on the Nasdaq stock market in 1984, bars anyone from holding 15% or more of its issued shares, the company's Web site says.
If anyone tries to obtain 30% or more of the shares, Reuters may use a single Founders Share to pass or defeat any motion at a general meeting.
As the preliminary approach indicated, analysts believed Reuters could yield to a takeover despite its structure.
"The restrictions of the constitution, however, are by no means insurmountable and an agreed bid is possible," said Sam Hart, an analyst at Charles Stanley.
In its notification to the London Stock Exchange, Reuters said "there is no certainty an offer will be made or necessary approvals, including those required under Reuters constitution, will be received."
Thomson, Reuters and Bloomberg all compete aggressively in what is known as the "terminal" market, for the data terminals on desks at the world's major banks and brokerages. Reuters was the market leader for many years, though it has steadily lost ground to Bloomberg. An April report from Inside Market Data Reference said Bloomberg has 33% of the market share, with Reuters at 23% and Thomson at 11%.
And while most people probably know the Reuters name for the group's news operation, that is just a small part of the company's business. Of Reuters' 2006 revenue of $5.11 billion (2.57 billion pounds), only $338.3 million (170 million pounds) of that came from the media segment -- although its news is a key selling point for terminals, as well.
Still, adding Reuters news operation could cause integration issues for Thomson, which acquired the AFX financial news service last year from Agence France-Presse and has been expanding its news bureaus in Europe to better compete with Reuters and Bloomberg.
Thomson also competes with Reed Elsevier in providing legal information. It built that business by acquiring Editorial Aranzadi, Spain's premier legal publisher, and West Publishing, a provider of legal information in the United States.
News of the proposal came just three days after Rupert Murdoch's News Corp. offered to buy Dow Jones for $5 billion.
Numis Securities said in a research note that Thomson is close to selling its U.S. college education business for $5 billion, "giving it firepower for the deal."
Numis said it believed Thomson would be a "suitable" owner in terms of the Reuters constitution. "Further, should Thomson fall foul of the Reuters Trust, which we view as unlikely, we believe a carve-out of the media business (7% of revenue) would be possible," Numis said.
The Financial Times, Dow Jones and the Globe and Mail newspaper of Canada all identified the bidder as Thomson Corp., citing people close to both companies.
Reuters has been attempting to increase revenue by focusing on new areas of business growth, including media and trading settlement, and expanding into new markets. Last year, it opened its first wholly owned development center in Beijing.
In March, Reuters reported a 30% drop in full-year profit as it continued its investment program targeting new markets, but was upbeat about 2007. Reuters said net profit for the year ending Dec. 31 came to $610 million (305 million pounds), while revenue rose 6.5% to $5.1 billion (2.57 billion pounds).
News Corp. made its offer for Dow Jones & Co. on Tuesday but the deal, which would add The Wall Street Journal to Murdoch's global media empire, faces doubtful prospects since Dow Jones' controlling shareholders have said they would vote against it.
Reuters was founded in 1851 when Paul Julius Reuter started sending stock market quotations between London and Paris via the new Calais-Dover cable.
Thomson was started by Roy Thomson, who established a business empire that began with a small radio station in northern Ontario. He bought his first newspaper in 1934 and his company grew to embrace Canada's dominant newspaper group and other interests ranging from North Sea oil to travel agencies, retailer the Hudson's Bay Co. and The Times, the London newspaper now owned by Murdoch's News International.
In 2000, Thomson sold its community newspapers in North America for about $2.5 billion. It sold its 55 daily and 75 nondaily newspapers, and sold the flagship Globe and Mail in Toronto in 2001.
Thomson reported first-quarter profits last month of $224 on revenue of $1.6 billion.