Thomson Reuters has been in talks with Blackstone Group over the sales of a majority stake in its Financial and Risk business unit. The sides announced on Wednesday that the deal has been officially reached, granting Blackstone Group a 55% stake in the division.
The purchase will cost Blackstone $17.3 billion, marking the largest non-property deal for the company. The newly forged partnership will peg Blackstone’s Schwarzman product in direct competition with Bloomberg’s financial terminals and data business. The F&R division enters into a 30-year agreement “to secure access to news services provided by Reuters for a minimum of $325 million annually.”
In order to gather the funds necessary for the Thomson Reuters deal, Blackstone is collaborating with Canada Pension Plan Investment Board and Singapore state fund GIC. Both are considered to be among the largest institutional investors globally. Of the total $17.3 billion needed for the transaction, $3 billion will be paid in cash, most of which will be allocated by Blackstone. The remaining $14 billion will be incurred as debt, and will be attributed to the newly acquired unit, to be paid in instalments.
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Blackstone has struck large-scale deals in the past, although it has mainly been focused on the real estate sector, highlighted by its purchase of Equity Office Properties and Hilton Hotels for $38.9 billion and $25.8 billion, respectively. The private equity firm also placed a strong bid to purchase Paysafe in the summer of last year.
Updated Financial Forecasts
The Thompson Reuters F&R deal has led to expectations and forecasts for the division in the upcoming year. Yearly revenues are expected to increase by 1%, while operating profit is showing a forecasted rise of 25% in 2018. Conversely, diluted earnings per share (EPS) forecasts have been downgraded, and are currently expected to be cut in half this year.
Moreover, the yearly adjusted EBITDA margin carries a current forecast between 30.1% and 30.4%. While adjusted Earnings Per Share in 2017 came in at $1.79, the current estimate is that the adjusted EPS in 2018 will fall within a range of between $2.48 and $2.51. Thomson Reuters’ stock price saw a rise of 6.7% yesterday, reaching $46.32 and a total market value of just under $32 billion. Surprisingly, Blackstone’s stock price fell 2% to $35.83 per share.