Reuters to Buy Multex.com
Tue Feb 18,10:19 AM ET Add Business - Reuters to My Yahoo!
By Jane Merriman
LONDON (Reuters) - The world's largest financial information firm, Reuters Group Plc, gained a platform for independent investment research on Tuesday with a deal to buy Multex.com, a specialist provider of company data.
Reuters said it agreed to pay $195 million cash for Multex, which provides earnings estimates, stock research and other information on more than 25,000 listed firms worldwide.
Reuters already owns six percent of the U.S.-based firm and has been eyeing the research sector amid a series of scandals among Wall Street investment banks accused of manipulating equity research to win corporate finance work.
Under a $1.4 billion settlement negotiated in December by New York Attorney General Eliot Spitzer, several big banks agreed to pay $450 million to fund independent research.
"In investment research, we've been looking for a while for a market entry strategy," Glocer told an analyst briefing.
He said Multex provides an electronic distribution system that links independent research providers, sell-side brokers, buy-side fund managers and individual investors.
"Combined with what Reuters has, we have a very powerful offering to this industry as it re-invents itself post-Spitzer," Glocer said.
"We are going to move quickly to integrate Multex... so that Multex content appears in our products rapidly."
Reuters hopes to use Multex to strengthen its own information products for institutional and retail customers -- in line with the group's strategic aim of refocusing its business on content and away from pure technology sales.
HIGH PRICE TAG?
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But analysts and fund managers said the Multex price tag was not cheap.
While the deal made strategic sense, because of Multex's strong franchise and revenues, the price looked expensive at 17 times earnings before interest, tax, depreciation and amortization, they said. At $7.35 per share, the bid stands at a 60 percent premium to Multex's last closing price.
Big investment banks, traditional providers of stock research to retail and professional investors, are scaling back equities research after the clampdown on Wall Street.
Professional investors may now increasingly want research and content apart from that provided by investment banks, especially in areas they ignore or can no longer afford to cover. Typically, they are dropping research on medium-sized and small companies and even on some smaller sectors.
Reuters hopes Multex can help it reach new customers, generating revenue from cross-selling to both Multex and Reuters clients and by combining products. It plans to develop Multex's business in Europe and Asia.
STRATEGIC SENSE
"At first glance the acquisition of Multex looks strategically sensible and bolsters in-house content," said Jonathan Helliwell, a media analyst at WestLB Panmure.
"Multex is an essential tool for analysts and fund managers," said Laurent Carozzi, an analyst at HSBC Securities. "If you cancel your subscription to Multex, then you may as well pack up and go home."
The acquisition is expected to close by the end of March.
Founded in 1993, Multex is based in New York and has more than 550 staff in North America, Europe and Asia.
Multex's customers comprise thousands of mutual fund managers, portfolio managers and institutional investors, plus research analysts and other financial services professionals.
Its main competitors are Thomson Financial, owner of the First Call earnings estimates business and part of Canada's Thomson Corp, and Standard & Poor's, a unit of McGraw-Hill Cos Inc. It has products that are used by about one fifth of U.S. asset management firms.
Reuters reported a record loss for 2002 earlier on Tuesday and announced a further 3,000 jobs cuts as part of a three-year plan to revive the group's fortunes.
J.P. Morgan Chase is advising Reuters on the Multex deal and Bear Stearns is advising Multex. |
