Blackstone is taking out an insurance policy of sorts in its takeover of Thomson Reuters’ financial-data division. The $20 billion buyout comes with features that enhance the Canadian seller’s upside if things go well, but leaves it with relatively more of the downside if they don’t.
Steve Schwarzman’s investment firm is injecting $3 billion of equity alongside some co-investors to buy a 55 percent share of the Financial and Risk unit, known as F&R. Thomson Reuters, the parent company of Reuters, which includes Reuters Breakingviews, will keep a $2.5 billion stake. Blackstone also puts in $1 billion through preferred shares, public documents filed in February show – which behave largely like debt but aren’t treated like it by credit-ratings firms. They pay a 14.5 percent coupon in the form of more preferred shares.
The first layer of protection against having struck a deal at an unfavorable price goes to Thomson Reuters. By remaining a 45 percent owner, it ensures that if Blackstone makes a success of things, it reaps some of the gains. There is another mechanism, too, to spare the company controlled by Canada’s wealthiest family from suggestions they sold on the cheap: if Blackstone’s annualized return beats 20 percent, Thomson Reuters’ stake rises to 47.6 percent.
