Thomson in talks to buy Reuters for $17.6 bln

LONDON, May 8 (Reuters) Canada's Thomson Corp is in talks to buy Reuters Group Plc for about 8.8 billion pounds (.6 billion) to create the world's biggest news and financial data company, the two firms said on Tuesday.

Reuters CEO Tom Glocer would become chief executive of the combined group under the terms of the proposed deal, they said in a joint statement. Reuters investors would get 352-1/2 pence in cash and 0.16 Thomson stock for each share, equivalent to 697 pence a share at Monday's closing prices.

That would be 42 percent above Reuters closing share price on Thursday, the day before it announced a bid approach. The deal value is based on the number of outstanding Reuters shares.

Reuters shares rose as much as 7 percent to a 5-year high of 659 pence in early trade. They stood 3.5 percent up at 0835 GMT. Thomson closed on Monday at 47.23 Canadian dollars, valuing the business at about C.8 billion (.9 billion).

Thomson, whose publishing interests span law, tax and scientific research, has been building up its financial data business as it looks to tap into booming global markets.

Currently third with 11 percent of the world's .5 billion market data business, Thomson would jump to 34 percent with Reuters, putting it just ahead of privately-owned Bloomberg on 33 percent, according to Inside Market Data.

The talks come amid a frenzy of dealmaking in the media sector.

Last week Rupert Murdoch's News Corp made a billion bid for Wall Street Journal owner Dow Jones&Co Inc., which was rebuffed by Dow Jones' controlling investors.

''Although a rival bid cannot be ruled out, given the scale of synergies on offer (and therefore healthy premium offered) ... we view Thomson as the bidder best placed to secure Reuters,'' Numis Securities analysts wrote in a research note.

Thomson and Reuters said they expected to make over 0 million of annual synergies within three years of completion of a deal.

The dual-listed group would be called Thomson-Reuters and the combined Thomson Financial unit and Reuters financial and media businesses would be called Reuters.

The combined group would adopt the Reuters trust principles aimed at safeguarding the independence of Reuters news, the companies said. The Reuters Founders Share Co, run by 15 trustees, has a ''golden share'' and could block a takeover.

''It should be emphasised that discussions are at a stage where there can be no assurance that agreement will be reached. No transaction will be announced without the support of the Reuters Founders Share Company,'' the companies said.

THOMSON-REUTERS The Thomson family bought its first newspaper in 1934 andbuilt a publishing empire which for a time included the Times newspaper and Scottish Television.

It branched into other fields, including creating a travel business that still bears its name, before focussing more recently on electronic publishing. It is in talks to sell its education unit, which analysts say could raise about billion.

Reuters was founded by German-born immigrant Paul Julius Reuter in 1851 when he opened an office to transmit stock market quotes between London and Paris via the new Calais-Dover cable.

The Thomson family, which owns about 70 percent of the Canadian group, would vote in favour of a deal with Reuters, the companies said. The family, through its Woodbridge vehicle, would own 53 percent of Thomson-Reuters.

Other Thomson shareholders would own 23 percent of the combined business and Reuters shareholders would own 24 percent. The deal is subject to approval by both sets of shareholders.

Under the proposed deal, a so-called equalisation agreement would mean that both companies' primary listings would be maintained. This should allow the two companies to remain in their existing equity indexes, the companies said.

Thomson President and CEO Richard Harrington would retire on completion of the deal, at which point Reuters' Glocer would become chief executive of the combined company.

The two firms said the deal could close this year, but might not complete until 2008.

REUTERS DKS PM1504