Shares of global information company Thomson Reuters fell in their debut on Thursday on jitters over a financial industry downturn.
The new company, formed by Thomson's more than $16 billion cash and stock purchase of Reuters, hopes its portfolio of products, ranging from financial to legal and health care, will help it ride out the impact of the credit crisis.
The combination allows Thomson to expand its financial data offering from its North American base, blending the Reuters trading business with Thomson's money manager activities.
It's also meant to help Reuters cut its exposure to financial markets, recently buffeted by credit crises.
Even so, brokerage ABN started its coverage of the new company with a "sell" rating on the stock, arguing that the financial industry is bracing for big job cuts and takeovers.
"This is not a helpful backdrop for the market-data industry, which accounts for 60 percent of Thomson Reuters' proforma revenue and is a fixed cost business," ABN's media team said.
Thomson Reuters, headed by former Reuters chief Tom Glocer, sells electronic news and data to traders, fund managers and analysts, as well as databases and other information to lawyers, accountants, scientists and the health-care industry.
Shares in the company, which announced that it may buy back up to $500 million of its shares over the year, fell up to 4 percent in Toronto and New York.
The London shares also fell and traded at a discount about 13 percent to the North American-listed shares.
Analysts had expected the London-listed Thomson Reuters shares to trade at a discount to the Toronto shares, citing the changing shareholder base and the unwinding of arbitrage trades that had bet on Reuters shares rising to the Thomson offer price.
‘Intelligent Information’
Thomson's publishing roots date back to 1934 when Toronto native Roy Thomson bought The Timmins Press in Northern Ontario.
The Thomson family has since been involved in textbook and newspaper publishing, at one point owning the Times of London.
Thomson sold The Times in 1981 and sharpened its focus on data publishing when it sold its North Sea oil interests in 1989 and Thomson Travel in 1998 and education business last year.
Reuters started in 1851 when German-born Paul Julius Reuter transmitted stock market quotes between London and Paris on the Calais-Dover cable.
Before that, he used pigeons to fly stock prices between Aachen in Germany and Brussels.
This was the beginning of the Reuters news service, which now has 2,400 journalists and became the foundation for a $5 billion-a-year news and financial data empire.
The new company, with headquarters in New York, has annual revenues of $12.5 billion, 50,000 employees and more than 40,000 customers in 155 countries.
Glocer, a former mergers and acquisitions lawyer, envisions a company that will provide "intelligent information" that people will pay for, he told Reuters in an interview.
"It's not just: 'Isn't it nice that instead of Reuters having 90 percent-plus concentration in financial, there'll be a more hedged, balanced portfolio," he said.
"What I think is more interesting is all of these units are going to work together over the long haul." The newly formed company's markets division with $7.4 billion in annual sales competes with Bloomberg LP for financial industry clients.
Bloomberg and Thomson Reuters each have about a third of the global financial data market, according to Atradia Consulting Director David Anderson.
Rivals also include Dow Jones, now a unit of Rupert Murdoch's News Corp, and Anglo-Dutch publisher Reed Elsevier.
Reed owns the LexisNexis legal database, a competing offering to Thomson's Westlaw, and competes with the company's $5.1 billion-a-year professional division.
To-Do List
The credit crisis, an economic downturn and meltdowns among investment banks such as Bear Stearns could hurt providers of financial data tools and products.
"A growing number of brokers, dealers, traders and banking staff will be sacked," Atradia's Anderson said.
The City of London alone could lose 40,000 jobs because of fallout from the U.S. subprime crisis and global credit crunch, according to JPMorgan.
Glocer, on the other hand, said the company was benefiting from hot demand for foreign exchange and energy data and was less exposed to problem areas like mortgage desks than rivals.
The group's first-quarter results next month will provide the first opportunity for a "candid outlook" for the enlarged group, Credit Suisse said.
Before then, investors will be wary of any analyst earnings downgrades, particularly amid the unwinding of arbitrage trades between the London and Toronto traded shares.
The company's immediate priority is to marry the Reuters array of financial products, such as the flagship 3000Xtra, with Thomson's products, such as ThomsonONE, which includes FirstCall company profit estimates.
Down the road, the challenge will be to integrate the financial products with the professional services.
Executives have said they want to achieve annual savings of $500 million within the first three years, with some of that coming from selling real estate as the enlarged group closes data centers and administrative offices it no longer needs.