ValuentumAd

Official PayPal Seal

Thompson Reuters’ Acquisition of FX Alliance Points to Growing Interest in Alternative Investments

publication date: Jul 9, 2012
 | 
author/source: RJ Towner
Previous | Next
 

Investment data provider and news aggregator Thompson Reuters (TRI) announced that it will acquire foreign exchange data provider FX Alliance (FX) for $623 million, or $22 per share. The deal represents a premium of 40% over the firm’s closing price on Friday. We still think shares of Thompson are fairly valued at current levels and view the deal as value neutral.

Though the deal is relatively small for Thompson, which sports a market cap over $23 billion, we think the price (about 25x 2012 consensus earnings) was reasonable considering FX Alliance is projected to more than double earnings this year. Consensus estimates suggest that FX's earnings growth will be in the high-single-digits from 2012 to 2013, but we think Thompson will be able to extract even greater value from the deal as FX Alliance’s services are a good complement to its current offerings. FX Alliance provides its users with a trading platform, and it serves money managers, broker-dealers, traders, and market makers.

Nevertheless, we think shares of Thompson Reuters are fairly valued at current levels. The company does sport an annual dividend yield in excess of 4.5%, but we do not think the dividend has room to grow meaningfully (especially if/when the FX deal closes). The firm scores a 6 on our Valuentum Buying Index (our stock-selection methodology), so we don’t think now is a good time to establish a position in the company in the portfolio of our Best Ideas Newsletter.


-------------------------------------------------
The High Yield Dividend Newsletter, Best Ideas Newsletter, Dividend Growth Newsletter, Valuentum Exclusive publication, ESG Newsletter, and any reports, data and content found on this website are for information purposes only and should not be considered a solicitation to buy or sell any security. Valuentum is not responsible for any errors or omissions or for results obtained from the use of its newsletters, reports, commentary, data or publications and accepts no liability for how readers may choose to utilize the content. Valuentum is not a money manager, is not a registered investment advisor, and does not offer brokerage or investment banking services. The sources of the data used on this website and reports are believed by Valuentum to be reliable, but the data’s accuracy, completeness or interpretation cannot be guaranteed. Valuentum, its employees, and independent contractors may have long, short or derivative positions in the securities mentioned on this website. The High Yield Dividend Newsletter portfolio, ESG Newsletter portfolio, Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio are not real money portfolios. Performance, including that in the Valuentum Exclusive publication and additional options commentary feature, is hypothetical and does not represent actual trading. Actual results may differ from simulated information, results, or performance being presented. For more information about Valuentum and the products and services it offers, please contact us at info@valuentum.com.