Reuters soars on approach, Thomson seen as bidder

LONDON, May 4 (Reuters) Financial news and data provider Reuters said it had received a takeover approach from an unidentified bidder, sending its shares up almost a third, with Canadian publisher Thomson widely touted as the suitor.

Canada's Globe and Mail newspaper reported on its website that Thomson was in talks to buy London-based Reuters, citing sources close to both companies.

Thomson has been building up its financial news business and is in the process of selling its education division which analysts think could raise 5 billion dollars.

Traders also reported talk that Rupert Murdoch's News Corp

London-listed Reuters declined further comment. Thomson Corp declined to comment. News Corp could not immediately be reached.

At 1849 IST, Reuters shares were up 26.9 per cent at 624-1/2 pence, valuing the business at about 7.8 billion pounds (15.5 billion dollars). They earlier touched a 5-year high of 649-3/4 pence.

''We believe the most likely bidder is Thomson, which is already a player in the financial space and, with the sale of its College Education business for 5 billion dollars well advanced, has the firepower to fund a deal,'' Numis Securities analysts wrote in a research note. They forecast any bid was likely to be in the range of 610 pence a share to 660 pence.

Other analysts, who declined to be named, said they could imagine a trade buyer offering up to 750 pence a share.

Media shares have surged since News Corp unveiled a 60 dollars- a-share-bid for Dow Jones on Tuesday -- a 65 per cent premium to the Wall Street Journal publisher's closing price on Monday. Dow Jones also competes with Reuters, Thomson and privately owned Bloomberg in providing real-time financial news.

One banking source said Thomson was unlikely to be able to pay for a deal fully in cash and that it might also face scrutiny from antitrust regulators.

Traders and analysts also cited Web search giant Google, software group Microsoft and private equity groups, possibly working with management, as potential bidders.

''The board of Reuters confirms it has received a preliminary approach from a third party which may or may not lead to an offer being made for Reuters,'' Reuters said in its statement.

''There is no certainty an offer will be made or necessary approvals, including those required under Reuters constitution, will be received.'' GOLDEN SHARE Under Reuters ownership structure, a single golden share held by The Reuters Founder Share Co. can block a hostile bid.

The Reuters Founder Share Co is run by 15 trustees, charged with ensuring the ''independence, impartiality, integrity and freedom from bias'' of the global news organisation.

An agreed bid, however, would be possible.

The trustees were not immediately available for comment.

Reuters was founded in 1851 when German-born immigrant Paul Julius Reuter opened an office in the City of London which transmitted stock market quotes between London and Paris via the new Calais-Dover cable. A few years before that he had used pigeons to fly stock prices between Aachen and Brussels.

The business grew into the world's biggest international news agency, but now makes more than 90 per cent of its revenues from its financial services business.

Hit hard by the downturn in markets after the bursting of the dot.com bubble, Reuters under Chief Executive Tom Glocer has slashed costs and sold off non-core businesses such as electronic broker Instinet and has recently benefited from a recovery in financial markets.

Thomson, with a market value of about 28 billion dollars, has long been tipped as a potential bidder. Last year, it moved to expand its financial news content by buying London-based AFX News for around 20 million dollars. The new Thomson-branded service is set for launch by the end of June.

At its first-quarter results, Thomson said it expected to announce a buyer for its education assets by the end of June and would use the proceeds to pursue growth opportunities.

Media mogul Rupert Murdoch held stakes in Reuters in the late 1980s and early 1990s and for a period was on the board.

The cost of insuring Reuters debt against default in the credit derivatives market rose. Five-year default swaps on Reuters were 12 basis points higher at 34 basis points, a trader in London said, with other media names also moving up.

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