Blackstone Outlines Blueprint for Thomson Reuters F&R Spin-Off, Refinitiv

Thomson Reuters may have only just announced Refinitiv as the new brand for its Financial & Risk unit once the business spins off from its parent later this year in a $20 billion deal with a consortium of investors led by private equity firm Blackstone Group, but the new owners already have plans for leveraging F&R’s assets and combining them with other assets owned by Blackstone.

In fact, these plans have been in development for some five years, when Blackstone first looked at buying the business, but “couldn’t really make the math work,” says Martin Brand, senior managing director in Blackstone’s private equity business, in a podcast describing the deal. “We revisited the idea in 2016, and at that time, it was clear that this would need to be a corporate partnership, so we really focused on developing the thesis: how would this business be better in partnership with Blackstone?”

After a significant number of meetings with the industry to develop this thesis, “the more we delved into this, the more our conviction grew,” Brand says. “We thought ‘We can really make it a better business.’ We thought ‘If it’s partnered with Blackstone, we can help with clients on the sell side, we can help with clients on the buy side, we can help them on the business side, and we thought we could drive some efficiencies in the business and help with M&A. We identified areas to invest in and accelerate growth.”

Then, a year ago, Blackstone held its first discussions with Thomson Reuters executives, who “bought in” to the thesis, then ran its commercial due diligence in the fourth quarter of last year. “At that point, we started focusing on the contract, and it was about a month-long negotiation, where we were basically holed up in a law office,” hammering out agreements for every part of the business that would be included in—or excluded from, in the case of Reuters News, which Thomson Reuters will retain but lease to Refinitiv under a long-term contract—the deal.

Brand says the deal reflects the growing importance of Big Data. “We believe that as machine learning will increasingly replace human business processes, data is going to be an extremely valuable commodity. But data needs to be efficiently ingested, it needs to be distributed, it needs to be classified so you can find what you’re looking for—and those are areas where F&R is a market leader. We see [the need for] it in some of our portfolio companies which have valuable data but don’t necessarily know how to distribute these, so there could be a synergy there,” he says. “Blackstone has made a significant investment in data. We believe alternative data is a fast-growing segment, and so our thesis within this particular investment, of course, is to be innovative, become a market leader—to the extent that we aren’t already—and invest behind this. And the fact that machine learning, AI [artificial intelligence], and Big Data are tailwinds for us makes this an even more attractive investment.”

And contrary to industry speculation that Blackstone would seek to offload the Eikon terminal business, Brand says the firm is “excited” about investing in this space. “The most difficult time is really behind that business,” he says, adding that the migration of legacy terminals to Eikon is 85 percent complete. “So the future, I think, is much better than the difficult period they had in the past…. And we also discussed several add-ons for Eikon that we believe will significantly strengthen the value proposition.”

Brand also cites the vendor’s Risk & Compliance business line and its assets such as Starmine and Lipper. “The key overall is that with the transaction, we’ll accelerate the pace of investment and focus to allow the business to pick up its growth rate,” he says.

Blackstone was unable to make officials available to elaborate on Brand’s comments by press time.