I don’t think my regular readers will be surprised if I mention that I have something of a philosophical disdain for floating rate issues. They trade with lower yields (generally!) than their fixed-rate cousins and there’s not really a lot of reason for that. Sure, there is a certain amount of interest rate protection built into the concept of a floating rate, which is very nice to have – but, as I pointed out in an article last August one very big reason why short rates are lower than long rates is credit risk … and with a floating rate preferred share, you have perpetual credit risk.
So anyway, Reuters announced today:
it has received a preliminary approach from a third party which may or may not lead to an offer being made for Reuters. There is no certainty an offer will be made or necessary approvals, including those required under Reuters constitution, will be received.
It has been mooted that the suitor is Thomson:
News and financial data provider Reuters said it had received a takeover approach from an unidentified bidder, sending its shares up almost a third, with Canadian publisher Thomson widely touted as the suitor.
Canada’s Globe and Mail newspaper reported on its Web site on Friday that Thomson was in talks to buy London-based Reuters, citing sources close to both companies.
Reuters and Thomson both declined to comment.
There is more speculation on Bloomberg.
Thomson has some CAD denominated bonds outstanding, maturing in 2014. I have been advised that the spread on these bonds has moved from +48bp to +110bp, which is a hell of a move for a seven year bond. Let’s see … modified duration is, oh, call it 6 years, yield change 62bp, 6×0.62 = 3.72 … that’s a 3.7% price change on the bond. And I don’t mean the price went up! It would appear that the bond market – or, at the very least, a few trigger-happy participants thereof – are concerned about the financing of the deal.
The preferreds will be on the volume charts for today’s market action report! 245,800 shares traded, including a block of 41,800 at 25.50 crossed by National Bank; 96,300 crossed by Scotia at the same price; and another 103,700 crossed by Scotia at the same price again.
TOC.PR.B has been around since the beginning of time, drifting in and out of the HIMI Preferred Indices as the volume waxes and wanes. The last change was removal at the end of February.
Update, 2007-05-07: Thomson has issued a press release:
The Thomson Corporation (NYSE: TOC; TSX:TOC) confirmed today that it has made a preliminary approach to the Board of Directors of Reuters Group Plc. that may or may not lead to an offer being made for Reuters.
A further announcement will be made in due course.
[…] The Thomson 7-year bonds, mentioned in the previous post on this issue, have rebounded to +85bp after spiking to +110bp when the rumours started. […]