Blackstone buys majority stake in Thomson Reuters F&R unit

LONDON/NEW YORK (Reuters) - U.S. private equity firm Blackstone Group LP catapulted itself into the big leagues of Wall Street's financial information industry on Tuesday with the acquisition of a majority stake in the Financial and Risk business of Thomson Reuters Corp.

The deal, announced by the companies in a statement, is Blackstone's biggest bet since the financial crisis. Co-founder Stephen Schwarzman will go head to head against fellow billionaire and former New York mayor Michael Bloomberg, whose eponymous terminals are the market leader in providing traders, bankers and investors with news, data and analytics.

Under the acquisition, Blackstone acquire a 55 percent stake in a newly hived off F&R business, the statement said. Thomson Reuters will retain a 45 percent holding and will receive approximately $17 billion, including about $3 billion in cash and $14 billion of debt and preferred equity issued by the new business, the companies said.

The Canada Pension Plan Investment Board and Singapore's GIC will invest alongside Blackstone but the statement did not specify the size of their stakes. The Canada Pension Plan Investment Board declined to comment. GIC could not immediately be reached for comment.

The new partnership will be managed by a 10-person board composed of five representatives from Blackstone and four from Thomson Reuters. The President and CEO of the new partnership will serve as a non-voting member of the board following the closing of the transaction. The companies did not say who that person would be.

Talks to sell Blackstone a stake in the F&R business first began in the summer, two sources familiar with the negotiations said.

The biggest sticking point during negotiations had been what the partnership would mean for Reuters News, the international news agency, which supplies the Thomson Reuters Eikon terminal with headlines, stories and analysis, said the two sources, who spoke on condition of anonymity.

In its statement, Thomson Reuters and the Thomson Reuters Founders Share Co, which has overseen Reuters' editorial independence since the company was first publicly listed in the 1980s, have agreed to "consequential modifications" to the Trust Principles that guide the news reporting division.

The statement did not give any more details.

A source familiar with the matter said there would be no change in the commitment of Reuters News to “independence,” “freedom from bias,” and supplying “reliable news” in keeping with the trust principles.

Kim Williams, chairman of the Thomson Reuters Founders Share Company, was not available for immediate comment.

Under the terms of the deal, Reuters News remains part of Thomson Reuters, along with its Legal and Tax and Accounting divisions.

The new F&R company will make minimum annual payments of $325 million to Reuters to secure access to its news service, equating to almost $10 billion. Thomson Reuters Chief Financial Officer Stephane Bello told an investor call that the payment represented what F&R used to allocate to Reuters News.

Reuters also makes money selling news to broadcasters, websites, newspapers, and other media organizations around the world. In 2016, Reuters reported $304 million revenue from its media business.

Thomson Reuters expects the transaction to close in the second half of 2018.

Thomson Reuters said it will use the bulk of the $17 billion proceeds from the transaction, estimated at $9 billion to $11 billion, to buy back shares in a bid/tender offer to all common shareholders on the close of the transaction.

It said it will also use proceeds to pay down debt and invest in it Legal and Tax & Accounting units and make selective acquisitions.

Woodbridge, the investment vehicle of Canada’s Thomson family and Thomson Reuters principal shareholder, will participate in the bid/tender offer. Woodbridge intends to keep its 50 percent to 60 percent ownership of Thomson Reuters, the statement said.

Blackstone, which already has business relationships with most of the major banks on Wall Street, bought a small financial information business, Ipreo, in 2014.

(Reporting by Pamela Barbaglia and Jessica Toonkel; editing by Carmel Crimmins and Grant McCool)