Press: Reuters’ Hot Financial Flash

The reinvigorated wire service goes public, reaping a fortune

Owning stock in Reuters, the London-based international news wire, used to be considered less an asset than a potential liability for the British and Commonwealth newspapers that hold most of the shares: the company sometimes lost money and paid no dividend for more than 40 years. Proprietors of defunct journals treated their residual interest in Reuters as worthless, omitting mention of the stock in their wills. Sellers of papers regarded their percentage of Reuters as at most an incidental value. This week, however, Reuters for the first time will offer shares to the public, and the once disgruntled owners expect to reap a paper windfall of $1.05 billion to $1.3 billion.

The dramatic change in Reuters’ fortunes is only indirectly a result of its journalism. The bulk of the company’s revenues, and profits, predicted to reach $98 million for 1984, come from a high-tech version of the original business started by Paul Julius Reuter in 1850: the deli very of financial news between the Prussian town of Aachen and Brussels by carrier pigeon. Reuters has become a prime worldwide supplier, with clients in 112 countries, of electronically transmitted, up-to-the-minute data about currency exchange rates, commodity prices, stocks, bonds, even the availability of tanker space. As the operation grew more successful, its owners debated whether to cash in on the gains, and after determining that the company’s trust agreement did not bar a stock sale, the directors announced last December the decision to go public.

The financial wire’s success has permitted Reuters to beef up its news operations. The editorial budget has grown 65% in the past two years. The agency nowadays provides complete and thoughtful coverage, especially from the Middle East, Africa and British and Commonwealth countries. The staff of 612 reporters and editors in London and at 92 bureaus assembles a daily menu of about 60,000 words in English, plus services in French, German, Spanish and Arabic. Next year Reuters will launch a photo service. Among the agency’s recent exclusives: the first bulletin of the death of Soviet Leader Yuri Andropov, and a report, on which Reuters had a 45-minute lead over all competitors, of the bombing attacks that killed almost 300 U.S. and French troops in Beirut last October. Yet Reuters does not hurry stories onto the wire before they are confirmed. New York Times Assistant Managing Editor Craig Whitney praises Reuters for reliability and restraint: “It is low key, cautious, thorough and not sensational.” Says Jerusalem Post Editor Ari Rath: “With Reuters, you rarely have to ask, ‘Do you have it from another source as well?’ “

The stock sale will bring welcome cash to some of London’s newspapers, which collectively own 41% of the company and are nearly all losing money or making decidedly modest profits. The biggest nominal winner is Rupert Murdoch, whose papers in Britain and Australia have a 9.8% total share of Reuters’ various classes of stock, worth approximately $100 million, none of which he is offering for sale. Murdoch, who also owns the New York Post and Chicago Sun-Times, acquired about 40% of his companies’ interest in Reuters as an apparently minor part of his $27 million purchase in 1981 of London’s Times and Sunday Times.

The success of Reuters’ diversification is viewed uneasily by its journalists. They are worried that as a publicly held company, it may cut back on unprofitable services, especially in the Third World. Says a former Reuters editor, Jonathan Fenby: “The shareholders will have every right to ask, ‘Why are you distributing these services to Africa when you lose money on it?’ ” Former Labor Prime Minister James Callaghan, who joined in the unsuccessful fight in the House of Commons to block the sale, charged that the public offering “will certainly weaken [Reuters’] independence.”

For the present, however, effective control of the company will continue in the hands of the newspaper associations. Moreover, company executives point out, Reuters’ financial clients also receive the news reports and use them to project market conditions. Says Managing Director Glen Renfrew: “News remains at the very heart of our business.”

— By William A. Henry III.

Reported by John Saar and Arthur White/London