Thomson Reuters shares have retreated since October after third-quarter revenue missed analysts’ estimates. The company has a current market value of $30.8 billion. Chief Executive Officer James C. Smith attributed that shortfall to potential customers delaying decisions amid regulatory changes resulting from the European Union’s Markets in Financial Instruments Directive, or MiFID II.
The financial and risk business faces challenges from cost-cutting among clients, including over a trend toward passive investing, weak investment-banking results and the introduction of MiFID II, analysts at Berenberg wrote in a Jan. 18 note. Industry trends including discounting and unbundling of services are also accelerating, adding competition, the analysts wrote.
“Thomson Reuters has been in M&A mode for some years now, but this will mark a step change,” said Alex DeGroote, an analyst at Cenkos Securities in London. A deal would give Thomson Reuters a world-leading private-equity firm as a partner to bring in more capital, potentially for consolidation, DeGroote said.
In 2012, Thomson Reuters sold its health-care unit, which provided data and analysis to hospitals, government agencies and employers, to Veritas Capital for $1.25 billion. In 2016, it offloaded its intellectual property and science division to Onex Corp. and Baring Private Equity Asia for $3.55 billion.
Any transaction would add to the $105 billion of private-equity deals targeting the media and technology industries over the past 12 months, according to data compiled by Bloomberg.
Thomson Reuters is controlled by Woodbridge Co., an Ontario, Canada-based holding company that manages the assets of the Thomson family. According to a regulatory filing last month, Woodbridge holds 63.6 percent of Thomson Reuters shares. The Thomsons, descended from company founder Roy Thomson, remain some of the richest people in Canada.
This article was provided by Bloomberg News.