Chairman asserts control at Thomson Reuters - WSJ
Wednesday 5 December 2012
David Thomson, head of the multi-billion dollar business empire that controls Thomson Reuters, is stepping in as the combined firm struggles to deliver on the promise of the 2008 merger, The Wall Street Journal reported on Wednesday.
The tie-up with Reuters has disappointed investors, and Thomson, pictured, chairman of the combined company, is playing a more assertive role, it said in a despatch from Toronto where the publicity-shy Thomson family is based.
Late last year, he presided over a wide-ranging management shake-up. And last week he replaced the head of the family’s holding company, Woodbridge, which owns 55 per cent of Thomson Reuters. The move also signals a change in the way the family that controls one of the world’s biggest media complexes manages its far-flung businesses, the Journal said.
When Thomson Corporation negotiated its $17 billion deal for Reuters, Thomson stayed on the sidelines through 18 months of talks, speaking to Reuters’ top management only on the day plans for the deal were announced in 2007.
“For the scion of Canada’s wealthiest family, the hands-off approach, described by people close to the merger, was par for the course. The family’s formula over the past two generations at the media empire founded by Mr. Thomson’s grandfather was ‘surround yourself with business people… and then let management manage,’ says Ron Barbaro, a former director,” the Journal said.
It said Geoffrey Beattie, a deal-maker replaced last week by another long-time Thomson lieutenant, David Binet, as head of Woodbridge, would focus on improving Thomson Reuters’ performance. Some people familiar with the matter said the move comes after months of tension between Thomson and Beattie over the stock market performance of the group, a merger Beattie had championed.
The deal was designed to create a financial news and information powerhouse by combining two storied media groups, the WSJ said. It would link Thomson’s dominance in sectors such as investment banking and wealth management with Reuters’ international footprint and strength in areas like foreign exchange trading, equity sales and news. “The combination hasn’t yet delivered all of the benefits envisioned,” the WSJ said.
Group revenue slid three per cent to $9.88 billion in the first nine months of this year, weakened by worse than expected downsizing at financial institutions across Europe. TRI stock is down around 20 per cent since the acquisition was completed, compared with a rise of about four per cent for the S&P500.
“The Thomson family’s fortune has felt the effect. Its stake in Thomson Reuters is now worth about $12.6 billion, down from around $16 billion.” The family, ranked by Forbes magazine in 2007 as the world’s tenth richest, is now 35th on that list.
The WSJ said that although the family’s controlling stake insulates Thomson Reuters from most outside investor pressure, the stock has frustrated some shareholders, including Canadians who have been longtime investors. Directors “have clearly dropped the ball, and shareholders have paid for it,” said Ian Hardacre, a fund manager at Invesco Canada, whose parent Invesco is among the largest investors in Thomson Reuters.
“Some family members began to complain about the performance of Thomson Reuters, according to people familiar with the matter,” the WSJ said.
Shortly after the deal’s completion, some Thomson executives began to resent what they saw as a “reverse takeover”. Reuters’ chief executive at the time, Tom Glocer, became CEO of the combined company and he tapped a Reuters lieutenant [Devin Wenig] to head the division that included financial information.
“There were cultural mismatches. At one point, professional-division head James Smith, from the Thomson side, delivered a no-frills, fact-laden presentation on the latest iteration of a desktop product for legal professionals. Among Reuters executives accustomed to flashier presentations, ‘there was a lot of snickering’ about how dry it was, said one person present.”
Thomson initially gave Thomson Reuters executives free rein, in the family’s customary hands-off style. “A collector of photographs, he sometimes called editors at Reuters’s photographic-agency business to talk about pictures, yet rarely reached out to top executives.”
Through struggles to perfect its flagship Eikon desktop product, Thomson had little contact with Glocer, other than at board meetings, according to “people familiar with the matter”. “Big investors also say Mr. Thomson reaches out to them. But at the annual meeting in May, he lingered to chat with small investors over sandwiches long after other directors had left.”
Friends in the close-knit Toronto business community regard Thomson as private almost to the point of reclusive, and a bit eccentric, the Journal said. “He sometimes arrives at business meetings in jogging gear or cargo pants, or wears sneakers with his suit. He spends large sums on art, but, like his father, Ken, shows frugality elsewhere. He will get years’ of wear from shoes and suits, said one person.”
Despite his evident preference for taking the back seat in management, he has a huge desire to do well at the business started by a grandfather – the late Roy Thomson, first Baron Thomson of Fleet – of whom he often talks admiringly, according to friends.
“He’s deeply competitive,” said Wesley Wark, a friend who first met Thomson at Cambridge University in 1975. “He doesn’t relish if the company is not doing well, he doesn’t relish having his performance outperformed.” ■
- The Wall Street Journal