Reuters Celebrates Big Bang With Shopping Spree; Three Deals Figure In Plans For U.S. Equities Data Market

Reuters Holdings PLC has stepped up its assault on the U.S. market for equities quotes with two specialized acquisitions and a takeover bid. Reuters offered $92 million for the portion of Instinet Corp. it doesn't already own, and acquired two privately-held quote software firms, Network Utilities, Inc. of Chicago and, as previously reported, Reveal Software, Inc. of Roslyn Heights, NY (MTR, September 1986).

The $7.25/share bid for Instinet underscores two Reuters strategies -- (1) to leverage itself into the U.S. equities market through acquisitions, and (2) to combine trading services and market information on the same network. "We're putting together what it takes to offer a fully-fledged package," says Reuters spokesperson Michael Reilly. "Instinet would be a leg up on anybody else in the business because it would offer trading through the same terminal."

Reuters holds 6.7 per cent of Instinet's outstanding shares, plus warrants that if exercised would bring its stake to 28 per cent (MTR, May 1986). The firms also have signed a series of marketing agreements covering services and technology in the U.S. and overseas. Instinet reported a 3d-quarter loss of $403,000 on sales of $3.9 million.

The buyout offer came in an October 24th letter from Reuters managing director Glen Renfrew to Instinet chairman William Lupien. While Reuters characterizes the bid as a "friendly offer," Renfrew did request a response from Lupien by the morning of the 30th. Instinet called an emergency board meeting to consider the offer. Following the bid, Instinet's shares jumped $1.75, to $7.00.

Network Utilities is a boutique quote vendor best known for its high-speed "Schwarzatron" terminal for options traders. Reuters is paying $7 million for the firm, which earned $696,200 on sales of $3 million in its most recent fiscal year. Reuters believes there's "a substantial international market" for Schwarzatron due to "the rapid growth of options trading worldwide," says Renfrew.

Reuters has big plans for the Schwarzatron. One is to use the technology overseas as a "top-of-the-line equity product," says NUI president Steven Schwarz. Another is to add Reuters contributed data to the existing NUI quote stream. Arbitrageurs, for example, might be able to have Reuters forex prices, forex options quotes, and NUI's analytics on the same terminal. Finally, NUI's software could be adapted to run on the Advanced Reuter Terminal (MTR, June 1986), creating what Schwarz calls, naturally, a "Schwarz-ART."

Network Utilities only serves about 400 customers, so Reuters's interest clearly is in the firm's technology. "The optimal use of a group like that," says Reilly, "is to let them continue what they're doing and feed them ideas about other business segments where that kind of software could be useful."

Currently in beta test is the Schwarzatron II, says Schwarz, which will be PC-based and provide a variety of new features, including portfolio management. As a result, he says, Reuters picked the right time to make a bid: "We were going to launch a new product and step up a level of technology and, actually, it was getting scary because it was getting past the level of capital that we really could risk."

The price tag for Reveal is $575,000. Reuters doesn't say what the firm's sales are, but does say it has sold about 1,500 units of its IBM-PC portfolio management package. Retail stockbrokers are Reveal's chief customer group. Reuters's plans include offering Reveal portfolio management on its VT100 terminal, and integrating it with the ART.