Thomson Reuters eyes “substantive” buys after Blackstone deal: Reuters

Thomson Reuters Corp is looking to make “substantive” acquisitions to boost its legal and tax units after selling a majority stake in its financial terminal business, Chief Executive Jim Smith said on Tuesday.

The news and information provider has set aside US$2 billion for deals, Smith told Reuters in an interview, after raising US$17 billion from selling 55 percent of its Financial & Risk (F&R) unit to U.S. private equity firm Blackstone Group.

“We are interested in bigger, more substantive deals,” Smith said. “I wouldn’t expect a string of small, bolt-on acquisitions. We’d rather spend that $2 billion on a handful of deals rather than spread across a couple of dozen.”

Thomson Reuters could spend more than US$2 billion if it found the right purchase, Smith told analysts on a conference call after reporting quarterly earnings.

“If an absolute home-run deal presented itself, we would certainly consider it,” he said.

Thomson Reuters shares rose 1.1 percent to $60.88 in morning trade.

The company had previously indicated that it wanted to use the funds to bolster its Legal and Tax & Accounting businesses, which are its two biggest units after the F&R deal. Last month, it agreed to buy Integration Point, a trade management software business, for an undisclosed fee.

The F&R unit now operates as a standalone business named Refinitiv.

OUTLOOK REITERATED

Smith said the company was on track for a solid 2018 and a better performance in 2019. The company reiterated its forecast, originally given in May, for low single-digit revenue growth in 2018. On the conference call, Smith told analysts that the company’s longer-term goal was for mid-single digit growth.

Edward Jones analyst Brittany Weissman said she was encouraged by growth in the company’s core businesses but was cautious about the outlook.

“We believe there is some uncertainty around Thomson Reuters’ earnings growth over the next couple of years as the company transitions to its new operating structure,” she said.

The company said it now expects adjusted earnings before interest, tax, depreciation and amortization (Ebitda) of US$1.3 billion for the year, having previously said it expected US$1.2 billion to US$1.3 billion. The year-ago figure was US$1.6 billion. Smith said he expected underlying profit to improve next year.

For the third quarter, Thomson Reuters reported a smaller-than-expected fall in profit. Earnings per share were 11 cents, adjusted for one-time items, down from 27 cents a year ago, hurt by a higher tax expense. That beat analysts’ average estimate of 3 cents, according to IBES data from Refinitiv.

Overall revenue rose 3 percent, excluding the effect of fluctuating exchange rates, to US$1.29 billion. Analysts had expected revenue of US$1.32 billion, on average.

Excluding exchange rate effects, Legal revenue rose 4 percent, Tax & Accounting revenue rose 3 percent and revenue from Reuters News fell 4 percent.

Adjusted Ebitda fell 21 percent, excluding the effect of exchange rates, to US$302 million, due to the higher income tax expense from the company’s continuing operations, offsetting higher earnings from its discontinued operations.

Update: Canada’s Thomson family is Thomson Reuters’ controlling shareholder through Woodbridge Co Ltd.

(Reporting by Matt Scuffham in Toronto; Editing by Bill Rigby)

(This story has been edited by Kirk Falconer, editor of PE Hub Canada)