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Blackstone Bets On A Wall Street Revival With $20 Billion Financial Data Deal

By newadmin / Published on Wednesday, 31 Jan 2018 19:03 PM / No Comments / 10 views


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David Thomson, chairman of Thomson Reuters Corp., gestures toward the Thomson Reuters logo outside their office in Toronto. Photographer: Norm Betts/Bloomberg News

For the last decade, the struggles of Wall Street’s largest investment banks has played directly into the hands of Blackstone Group, which&nbsp;amassed well over a quarter of a trillion dollars in assets in that time span. Now, Blackstone&nbsp;is betting big on a resurgent Wall Street with its acquisition of a 55% stake
Thomson Reuters’s financial&nbsp;and risk business, a deal that values the unit at $20 billion.

Blackstone, alongside co-investors Singapore’s GIC and the Canadian Pension Plan Investment Board, is taking control of a financial data business&nbsp;with 440,000 users spread across the world’s biggest investment banks, private equity firms and hedge funds. Its Thomson Reuters Eikon terminal competes directly against
Bloomberg as a platform where traders and portfolio managers research and execute their market moves; overall the unit generated $4.5 billion in revenues and $1.4 billion in adjusted EBITDA through the first 9 months of 2017.

This year the F&amp;R business has seen revenues drop&nbsp;1%, and in 2015 and 2016 they grew at 1%-to-2% rates, hamstrung by competition and continued headcount pressure at many of the world’s largest investment banks. Yet, the business is a crown jewel of the Thomson Reuters media empire, contributing the lion’s share of profits&nbsp;at adjusted EBITDA margins of 31.5%. In betting big on F&amp;R, Blackstone likely sees the combination of a highly profitable existing business, combined with a potential tailwind as&nbsp;large investment banks are freed from some post-crisis regulations and begin to rebuild their trading desks and other risk-taking businesses.

“We are delighted to partner with Thomson Reuters in continuing to grow the Financial and Risk business. This is a landmark transaction for Blackstone and our investment partners,” said Joe Baratta, head of Blackstone’s private equity business. For Blackstone, not only is the Thomson Reuters F&amp;R deal one of its largest ever, it also involves weighty co-investors, an emerging trend in private equity as funds attempt to pull off large acquisitions without concentrating limited partners in two funds on a single deal.

Added Blackstone senior managing director Martin Brand, “the F&amp;R division has tremendous assets, including a world-leading data business, essential risk and compliance solutions, OTC trading venues, wealth management software, and a strong desktop business. The partnership with Blackstone provides an opportunity to increase efficiency and accelerate revenue growth through innovation and focus on creating uniquely compelling products for F&amp;R’s customers.”

Thomson Reuters, which will receive $17 billion in gross proceeds, will retain a minority 45% stake in the F&amp;R business. Overall, the deal will be funded by $14 billion of debt and preferred equity and a $3 billion cash contribution from Blackstone. Thomson Reuters will keep its worldwide news business, in addition to its dominant legal, tax and accounting platform.

With its windfall, Thomson Reuters will pay down debt, targeting a net debt-to-EBITDA leverage ratio of 2.5x. It further expects to spend $1 billion-to-$3 billion on organic growth efforts and use up to $11 billion to repurchase stock via a a tender offer. Woodbridge, an entity controlled by the founding Thomson family, will participate in the tender and maintain its ownership in the company at between 50% and 60%.

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David Thomson, chairman of Thomson Reuters Corp., gestures toward the Thomson Reuters logo outside their office in Toronto. Photographer: Norm Betts/Bloomberg News

For the last decade, the struggles of Wall Street’s largest investment banks has played directly into the hands of Blackstone Group, which amassed well over a quarter of a trillion dollars in assets in that time span. Now, Blackstone is betting big on a resurgent Wall Street with its acquisition of a 55% stake
Thomson Reuters’s financial and risk business, a deal that values the unit at $20 billion.

Blackstone, alongside co-investors Singapore’s GIC and the Canadian Pension Plan Investment Board, is taking control of a financial data business with 440,000 users spread across the world’s biggest investment banks, private equity firms and hedge funds. Its Thomson Reuters Eikon terminal competes directly against
Bloomberg as a platform where traders and portfolio managers research and execute their market moves; overall the unit generated $4.5 billion in revenues and $1.4 billion in adjusted EBITDA through the first 9 months of 2017.

This year the F&R business has seen revenues drop 1%, and in 2015 and 2016 they grew at 1%-to-2% rates, hamstrung by competition and continued headcount pressure at many of the world’s largest investment banks. Yet, the business is a crown jewel of the Thomson Reuters media empire, contributing the lion’s share of profits at adjusted EBITDA margins of 31.5%. In betting big on F&R, Blackstone likely sees the combination of a highly profitable existing business, combined with a potential tailwind as large investment banks are freed from some post-crisis regulations and begin to rebuild their trading desks and other risk-taking businesses.

“We are delighted to partner with Thomson Reuters in continuing to grow the Financial and Risk business. This is a landmark transaction for Blackstone and our investment partners,” said Joe Baratta, head of Blackstone’s private equity business. For Blackstone, not only is the Thomson Reuters F&R deal one of its largest ever, it also involves weighty co-investors, an emerging trend in private equity as funds attempt to pull off large acquisitions without concentrating limited partners in two funds on a single deal.

Added Blackstone senior managing director Martin Brand, “the F&R division has tremendous assets, including a world-leading data business, essential risk and compliance solutions, OTC trading venues, wealth management software, and a strong desktop business. The partnership with Blackstone provides an opportunity to increase efficiency and accelerate revenue growth through innovation and focus on creating uniquely compelling products for F&R’s customers.”

Thomson Reuters, which will receive $17 billion in gross proceeds, will retain a minority 45% stake in the F&R business. Overall, the deal will be funded by $14 billion of debt and preferred equity and a $3 billion cash contribution from Blackstone. Thomson Reuters will keep its worldwide news business, in addition to its dominant legal, tax and accounting platform.

With its windfall, Thomson Reuters will pay down debt, targeting a net debt-to-EBITDA leverage ratio of 2.5x. It further expects to spend $1 billion-to-$3 billion on organic growth efforts and use up to $11 billion to repurchase stock via a a tender offer. Woodbridge, an entity controlled by the founding Thomson family, will participate in the tender and maintain its ownership in the company at between 50% and 60%.

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