Refinitiv loses further ground to Bloomberg - a test for buyer LSE

The former Reuters terminals and data business is struggling to close the gap on Bloomberg in a $32 billion market for supplying prices and analytics to banks and asset managers, underlining the challenge that London Stock Exchange Group will inherit with its planned purchase later this year.

An annual study indicated Refinitiv’s share of the market slipped to 21 per cent in 2019, down a percentage point from the year before and well behind Bloomberg, with 33 per cent.

The business became the financial and risk division of the combined group when the Thomson organisation bought Reuters in 2008. It was re-branded Refinitiv when private equity investors headed by Blackstone bought a 55 per cent share for about $20 billion in 2018.

LSE is buying Refinitiv in an all-share deal worth $27 billion. 

Over the past five years, it has fallen back in the race to become the data provider of choice for Wall Street and beyond, according to a study by Burton-Taylor International Consulting, the FT said. Its share in 2014, when the business was known as Thomson Reuters, was 26 per cent.

Such a decline in market share is “significant,” said Robert Iati, a Burton-Taylor director.

The market for financial information has enjoyed rapid growth in recent years, fuelled by increased automation and also by companies and governments turning to capital markets rather than banks for their financing.

For the first time, Refinitiv did not provide numbers for this year’s Burton-Taylor study, which drew on previous disclosures and other industry sources.

“Comparing apples to oranges is never easy,” the FT quoted Refinitiv saying. “The market segment we see ourselves operating in is broad, increasingly digital and extends beyond the traditional legacy market data segment. For example, Refinitiv includes indices, venues, trading systems, digital, cloud-based delivery, AI and risk - this wider definition better represents the range of our partners and requirements of our vendors.”

Quarterly filings from Thomson Reuters, which owns 45 per cent of Refinitiv, show that the company’s revenues were flat at $6.2 billion on a constant currency basis last year, although its adjusted ebitda margin improved to 35.3 per cent from 35.3 per cent. Ebitda - earnings before interest, taxes, depreciation and amortisation - measures a company’s overall financial performance.

By contrast, Bloomberg’s revenues were up almost six per cent to $10.5 billion, Burton-Taylor calculated, as investors bought more of its data for pricing and valuations.

Last year, Refinitiv had 390,000 users of its Eikon terminal, down from 445,000 in 2010, according to Burton-Taylor. Its prices are variable, depending on the type of product and customer, but tend to be cheaper than Bloomberg. 

Bloomberg added another 2,050 users to make a total of 332,550 last year, up from 265,000 in 2009. Bloomberg’s average terminal price was $1,968 a month last year, according to Burton-Taylor.

Analysts told the FT that the onus was on LSE and Refinitiv to make the most of Refinitiv’s traditional strengths such as Tradeweb, a bond trading platform, and FXall, a currencies marketplace.

Just over 62 per cent of Refinitiv's revenue comes from real-time information and four-fifths of that is concentrated in Refinitiv’s top 75 accounts, Burton-Taylor estimated.

That dovetails with LSE’s plans to focus on getting its biggest bank and asset-manager customers to spend more on data and services that overlap. But the plans are ambitious, the FT said. LSE is forecasting a compound annual growth rate in turnover of five per cent to seven per cent for the combined business in the first three years after the deal is completed. ■