Bloomberg LP spares no expense on first big deal

August 25, 2011

By Jeffrey Goldfarb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Bloomberg LP is sparing no expense for its first big deal. New York Mayor Michael Bloomberg’s financial information company — a rival to Thomson Reuters, the parent company of Breakingviews — agreed to buy niche publisher BNA for about $1 billion cash. At 36 times last year’s earnings, no public company could reasonably compete. But the price reflects Bloomberg’s ardor to expand its influence and build a cushion against Wall Street.

The acquisition represents a big shift in several ways. In its roughly 30-year history, the Bloomberg enterprise has built rather than bought its powerful position supplying information to bankers and traders — a business worth $16 billion, according to McGraw-Hill. Bloomberg cashed in on the extraordinary boom years when the industry’s growth outpaced GDP but now faces a prolonged slowdown as financial institutions pare back.

The areas of tax, legal, and regulation that are BNA’s specialties should provide useful shelter. The strategy helped Reuters when the financial crisis struck a few years ago and it sold itself to the Canadian Thomson Corp, a much larger rival to BNA. The benefits are still being felt, too. While revenue in Thomson Reuters’ markets division declined 1 percent last year, it grew 3 percent in the legal unit and 7 percent in tax and accounting.

Bloomberg also wants to broaden its power beyond the nation’s financial capital to its political epicenter. It launched Bloomberg Government earlier this year. But employee-owned BNA, started 80 years ago, has already stealthily established clout among lawmakers, regulators and lobbyists. And though its areas of coverage generally represent a departure for Bloomberg, there should be sufficient overlapping interest from its existing audience of financial professionals to help justify the premium.

And a rich one it is. BNA staffers were able to sell shares back to the company for $17.50 apiece in the most recent window, just closed. Bloomberg is offering $39.50 — and to keep BNA separate. But many of the unionized workers there, who must vote on the deal, could still be wary that by tendering they might be signing their own pink slips. That means Bloomberg can’t yet be completely sure its money will talk loud enough.

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