Content Matters

More details have come out on the proposed Thomson acquisition of Reuters.

The combined entity, to be called Thomson-Reuters will be dually listed and would be headed by current Reuters CEO Tom Glocer.  Current Thomson CEO Dick Harrington would retire upon completion of the transaction.

On the financial side, the proposed deal would value Reuters at 8.87 billion Pounds (US $17.7 billion).  Woodbridge, the Thomson family trust, would own 53% of the merged company, with other Thomson shareholders getting 23% and Reuters shareholders approximately 24%.

The Board would consist of 15 members, with five to be drawn from the current Reuters board, plus CEO Tom Glocer.  Of the remaining nine, Woodbridge could name four, including the chairman.

According to Thomson CEO Dick Harrington, the combined company would "create a major global financial information player by combining the complementary strengths of Thomson Financial and Reuters to serve both buy-side and sell-side customers around the world."

It will be interesting to see how regulators view this potential merger from an antitrust perspective.  The combined Thomson-Reuters would equal the market share of Bloomberg, creating a duopoly in financial information.  At the same time, it could open up new opportunities for smaller players in that market to grow, as many financial institutions require a second source for critical content and merging the companies would eliminate each as an alternative option for earnings estimates, filings and research.

Roger Ehrenberg hypothesizes that the true value of a Thomson-Reuters merger could be in the creation
of what he calls a "Smart Pipe".  In essence, that the huge repository of content these two companies
house could be leveraged in the creation of numerous high value products, if all the content is  tagged, organized and accessible. 

Both Thomson and Reuters have made efforts in this area (most recently through Reuters' proposed   acqusition of ClearForest) though neither have much to show so far.  While they will have incredible
content resources available, it's not clear to me that the combined company will be nimble enough to 
exploit what each has failed to do individually.  And, with massive integration projects on the horizon, I don't see that changing in the short-term. 

Assuming this merger goes through as planned, I think that it will create some interesting opportunities for small, nimble players to establish strong positions in niche segments.