December 6, 2018 / 10:00 PM / 8 days ago

Breakingviews - Mike Bloomberg can learn from Thomson Reuters

Former New York City Mayor Michael Bloomberg speaks on the third day of the Democratic National Convention in Philadelphia, Pennsylvania, U.S. July 27, 2016. REUTERS/Mike Segar

NEW YORK (Reuters Breakingviews) - Mike Bloomberg said on Tuesday that he has “a lot of experience” that would be useful if he were president of the United States. Appearing in Iowa, the U.S. state that kicks off the quadrennial primary season, he added that he’d try to sell his financial-data empire if he wins the 2020 presidential race. Lucky for him, money is plentiful for a buyout that could be valued at $40 billion. And there’s a recent deal that could provide a blueprint: the sale of Refinitiv to Blackstone by Breakingviews parent Thomson Reuters.

The private-equity shop led by Steve Schwarzman acquired a 55 percent stake in Bloomberg’s arch-rival two months ago in a deal valuing the whole of Thomson Reuters’ financial-data business – subsequently renamed Refinitiv – at $20 billion. It was the biggest buyout since the financial crisis, and the $14.5 billion of debt that financed the deal was oversubscribed by potential investors.

Bloomberg’s revenue is roughly two-thirds larger at around $10 billion, CNBC reported. At a 40 percent EBITDA margin, which is what the business generates according to sources cited by Recode, and at a valuation of 10 times that profit figure – just under what Refinitiv secured – it would be worth $40 billion. Continuing to follow the Refinitiv model, where three-quarters of the deal was funded by leverage and the original owner retained a 45 percent stake in the business, a buyer of a 55 percent stake would need to write an equity check of around $5.5 billion and help find roughly $30 billion in debt.

Those are daunting figures, especially with debt markets wobbling in recent weeks. Yet finance remains abundant. Private-equity shops have roughly $1 trillion in dry powder according to data provider Preqin, and they can bring in giant pension and sovereign wealth funds as partners, as Blackstone did with the Canada Pension Plan Investment Board and Singapore’s GIC on Refinitiv.

Carlyle is one logical candidate to lead a buyout, for two reasons. First, it just raised an $18.5 billion buyout fund. Moreover, it would give the private-equity shop bragging rights against its larger rival Blackstone. Co-Chairman David Rubenstein hosts an interview program on Bloomberg TV. Apollo Global Management and KKR have also raised big buyout funds and their founders, like Rubenstein, are cohorts of Bloomberg.

Offering to sell the business may not gain Mike Bloomberg much credit with Iowan Democrats. And his company has made no statement on the matter. But selling control to outsiders would make a contrast with Donald Trump, who put his businesses in the hands of his children when he became president – and would give Bloomberg even more cash to fuel his political ambitions.

Breakingviews

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