A U.S. bankruptcy court in St. Louis yesterday (May 3) approved a $275 million bid from Reuters for portions of ailing market-data provider Bridge Information Systems which filed for Chapter 11 earlier this year.
The court's decision follows the April 30 approval of the Reuters' bid--selected for being the "highest and best" offer--by Bridge's board of directors. "Best", in this case, is difficult to define as bidders such as Reuters, SunGard, which came in at $165 million, and Welsh, Carson, Anderson & Stowe entered offers for different combinations of Bridge assets with different stipulations and dollar amounts.
Now that the court has approved the Bridge board's recommendation, regulatory approval still awaits, though Alex Hungate, co-CEO of Reuters America, (the geographic entity which oversees all customers in the Americas) says he is optimistic things will go smoothly. He makes the case that, prior to the acquisition of the desired Bridge assets, Reuters has little presence in North America, especially on the buy side (investment management) where the desired assets are used.
A spokesperson for Reuters says, "Our legal people and the Department of Justice (DOJ) have already been in contact informally because any kind of deal like this would be subject to any number of different kinds of review, including DOJ, and we hope that we can get his all cleared so we can close within the next four months."
Hungate says that the main goals behind the purchase were the desires to gain a foothold in North America and also to pair up Bridge's buy-side community with Reuters' internationally-flavored sell-side network. Additionally, there were many interesting pieces of Bridge technology that Hungate says Reuters wanted in its inventory.
"There are many capabilities and pieces of functionality to Bridge Station which makes it unique to anything Reuters has today," he says.
Hungate also cites Reuters transformation of Quotron, a real-time financial information provider over the Internet, from a money pit into a market leader. He says that things were going so poorly at Quotron that Citigroup actually paid Reuters to take the dying provider off its hands. "I think with Reuters the risk of failure is probably the lowest of any potential acquirer," he says.
Included in the Reuters' bid are Bridge Information Systems (in North America), a range of products targeted at institutional equities traders and portfolio managers; EJV, which provides bond pricing, data and analytics services; Bridge Trading Technologies (BTT), which provides software, information and transaction services to connect brokers and their buy-side clients, including indications of interest, order routing, order management, portfolio management and valuation services; which includes Bridge Trading, a licensed broker dealer, primarily in NYSE-listed securities; eBridge, which provides internet solutions to institutional firms; and CRB Index, a measure of US commodity prices.
Among assets which Reuters has chosen not to acquire are the ADP retail equity information business, Telerate, Bridge Information Systems outside North America, BridgeNews, the Bridge Commodity business including the Commodity Research Bureau and Bridge's interest in the Australian company Bridge/DFS. However, Reuters will be entitled to share the proceeds of any sale by Bridge of Telerate or Bridge's European or Asian operations.
Reuters expects the deal for the selected Bridge assets to close within four months and has estimated that integration should cost around $65 million taking between 18 to 24 months--not as large an undertaking as one might expect, says Hungate, because both companies have technology based in open standards. He adds that Reuters will retain approximately 85 percent of Bridge employees that come over with the new divisions.
Additional terms of the deal include that from July 1 Reuters will pay Bridge up to $10 million a month through to closing to fund continued operations of the businesses covered by the Reuters bid as well as Telerate's US operations and various bankruptcy administrative costs. Reuters has also agreed to offer financing to Bridge's network provider Savvis Communications of up to $7.5 million a month to help fund its operations from May until the transaction has closed.
If the transaction is not completed by the end of August both Reuters and Bridge have the ability to terminate the agreement, subject to an extension by Reuters of two months.
Hungate says that until the deal is closed, Reuters is prohibited from contacting Bridge customers to allay any deal-related anxiety they might be experiencing. He does, however, say that there is no reason for Bridge customers to start looking for other providers to fill their market data needs. "We wouldn't buy anything in order to shut it down, we're only buying things that we intend to manage going forward and to improve on going forward."