Dow Jones to Acquire Reuters’ 50 Percent Interest in Factiva
Paula J. Hane
Posted On October 23, 2006
Claiming the time is right for Factiva (http://www.factiva.com) to have just one owner, Dow Jones & Co., Inc. (http://www.dowjones.com) announced it has signed a definitive agreement to acquire Reuters' 50 percent interest in the joint venture. Dow Jones will pay Reuters $160 million at closing, and it will make annual payments over the next 3.5 years "under a variety of agreements" with an estimated value of about $25 million. Dow Jones plans to fund the purchase with the sale of up to six Ottaway community newspapers. Completion of the transaction is subject to the usual regulatory approvals and closing conditions, and it is expected to occur by the end of 2006.
Factiva will be integrated into Dow Jones' Enterprise Media Group, which is run by Clare Hart (she served as Factiva's CEO from 2000 until her appointment as president of the Enterprise Media Group in February 2006). For Dow Jones, the deal will help reduce the company's reliance on print products as well as make it easier to create new products and services and offer cost savings. As to why Reuters (http://www.reuters.com) decided to sell its stake in the company at this time, Reuters' CEO Tom Glocer said: "The simple answer is that the price is right and the timing is right."
Both companies stressed Factiva's successes, the good partnership they forged, and the positive aspects of the sale at this time. Glocer commented: "Dow Jones has been a very good partner and together we have built a valuable asset in Factiva. We view this transaction as the natural conclusion to this successful joint venture. We wish Dow Jones every success in taking Factiva to the next phase of its evolution."
In turn, Rich Zannino, CEO of Dow Jones complimented its partner of 7 years. "Reuters has been a very good partner, and since 1999 the Factiva joint venture has created much value for the customers and shareholders of Dow Jones and Reuters." He explained the attraction of the acquisition: "Owning 100 percent of Factiva will accelerate the pursuit of our mission, which is to be the world's best publisher of high quality, indispensable and conveniently accessible business and related content across all media channels."
Zannino further explained what made the deal work: "Strategically and operationally, Factiva fits our Enterprise Media Group like a glove, creating significant synergies which result in a compelling financial return to Dow Jones while enabling us to pay an attractive price to Reuters."
Alan Scott, Factiva's chief marketing officer, said the acquisition was a "win-win situation" that will result in Factiva offering a "richer and more innovative suite of products." Joining with a single organization will allow Factiva to share content, technology, and talent more freely.
He also noted that the transaction will remove certain joint venture conditions that had limited Factiva's business opportunities in its core enterprise business market. In the past, for example, Factiva was restricted from doing business in certain markets, such as the trading floor of financial institutions. Removing these restrictions will allow Factiva to develop applications with Dow Jones Newswires and Dow Jones Licensing Services (both units are part of the Enterprise Media Group) that better target the financial-services market. In addition, in some circumstances Factiva could not offer real-time information products, but this will now change.
"You won't see dramatic shifts in how we do business," Scott commented. "But, you'll see us able to make faster and bolder decisions. This acquisition is exciting and liberating."
And, given the competitive landscape for a service such as Factiva and the availability of free Web content, the ability to react quickly is crucial. Glocer commented: "My belief is that Factiva will be able to react more nimbly and creatively to these new challenges under the ownership of a single parent. Therefore, we look forward to continuing our relationship with them, but as a supplier and user rather than as a parent."
Reuters' content will continue to be available through Factiva until at least mid-2010. In connection with the transactions, Reuters has agreed not to compete with Factiva's core business for a 2-year period and to continue the exclusivity arrangements currently in place for certain Reuters' content provided to Factiva.
Factiva has about 750 employees, while the Enterprise Media Group has about 1,450. Staff reductions are expected to affect a "single-digit percentage" of the combined staff, according to a company representative. During a conference call (the Dow Jones 3Q 2006 Earnings Call), Hart indicated that "integration and execution plans are in development" for the group. She stated: "On a personal note, I have to say that I'm delighted that this transaction is happening. Having spent 7 years with Factiva, and now the most recent 7 months with the Enterprise Media Group, the synergies are obvious, and the long-term potential for Dow Jones and Factiva is great."
Analyst John Blossom of Shore Communications, Inc. called the acquisition a "sweet and sour deal"; he also said it "doesn't make for a terribly glamorous return on Reuters' investment[,] but it's enough to provide a graceful exit into a straight licensing relationship and to free both partners to pursue markets as they may." He concluded: "Both parties have little to lose and much to gain from calling it a day at this point—and only themselves to blame if they don't make the most of the opportunity."