In 1883, Paul Julius Reuter distributed a note to his correspondents. It asked them to report “fires, explosions, floods, inundations, railway accidents, destructive storms, earthquakes, shipwrecks attended with loss of life, accidents to war vessels and to mail steamers, street riots of a grave character, disturbances arising from strikes, duels between, and suicides of persons of note, social or political, and murders of a sensational or atrocious character”.

The man who founded the news agency continued: “It is requested that the bare facts be first telegraphed with the utmost promptitude, and as soon as possible afterwards a descriptive account, proportionate to the gravity of the incident. Care should, of course, be taken to follow the matter up.”

It is a memo treated with a certain reverence at Reuters, as if it were the constitutional document that captures the bare essence of the news agency.

The deal that Tom Glocer announced yesterday makes the Reuter memo look less like an article of faith and more like an historical relic. The combination of Reuters and Thomson Corporation marks a fundamental shift in the nature of the company away from its roots in journalism and into a future of financial analytics. The combined company will be able to provide not only more real-time data to more customers, but also more financial and corporate archives. In short, it will offer a wider and deeper trading platform for financial professionals.

BACKGROUND

• Hedge fund takes stake in Reuters

• Reuters chief to receive £27m after takeover

• Thomson and Reuters agree £8.7bn takeover

• Thomson cashes in on learning division

• Bid likely to cap Reuters at £8.8bn

Has Reuters chosen the right way?

The deal with Thomson marks a shift away from Reuters' roots in journalism and into a future of financial analytics

Related Internet Links

• Reuters company information

• Reuters share price chart

• Reuters forecast

For the people at Reuters, who have been breaking news before everyone else ever since Abraham Lincoln was shot in 1865, this transformation will not come as a surprise.

Since he took over as Reuters chief executive in 2000, Mr Glocer has cut costs and focused the company on financial data services. In particular, he has been looking to position the company beyond subscription revenue from the sale of Reuters information feeds and into the kind of data delivery that puts the company in the middle of financial transactions from which it can exact a percentage fee.

The question, therefore, is not whether the Reuters deal means that the company is drifting further from the history forged by Paul Julius Reuter. Instead, it is whether the merger is the best means of advancing this vision of the company’s future.

Bloomberg has a 33 per cent market share. Reuters has a 23 per cent share and is combining with Thomson, which has 11 per cent. There will, most likely, be regulatory issues that will hold up this process: Bloomberg is a muscular competitor and the company’s clientele in the banking world may well have something to say.

The deal gives Thomson-Reuters scale and unprecedented client access. Mr Glocer will have to prove that the combination will not cause such internal contortions – not to mention painful cost cuts – as to suffocate the intellectual and technological innovation that is critical in an age of such rapid change in the information business.

Mr Glocer often says that Reuters, under his stewardship, has been turned into a good company. It is not yet, he says, a “great” company, such as Goldman Sachs or Tesco. Interestingly, both of those businesses have grown organically, rather than through a transformational deal. Likewise, Mr Glocer’s chief competitor – Bloomberg – has become the market leader by relying on the talents inside the company to develop information products to meet the ever-changing demands of the outside world.

Shah has hard act to follow

Pity poor Sanjeev Shah, the new boss of Fidelity’s Special Situations Fund.

His predecessor, Anthony Bolton, headed up the fund the same year that Margaret Thatcher became prime minister. In the 28 years since, he has been Britain’s most successful unit trust manager: an investment of £1,000 in the Special Situations Fund when it was launched in December 1979 would be worth nearly £160,000 today, compared to just over £30,000 in the average UK unit trust.

By any measure, therefore, Mr Shah has a tough act to follow. Given the nature of contrarian investment – i.e. the purchase of unfashionable assets – it will take time for Mr Shah to prove that he is a worthy successor.

But what makes his life so much more difficult than his predecessor’s is the nature of the market that he is operating in. These days, it is so much harder to find relatively cheap companies to buy because private equity, pension funds and hedge funds – all backed by banks falling over each other to lend – have created a new level of demand. The market is much less discriminating than it was in 1979. Mr Shah is promising that he is an investor in the Bolton mould. His management of the fund will be “very much about continuity”. He may want to deliver business as usual at the Special Situations Fund, but the markets have changed.

Queue to sue

Class-action lawyers on both sides of the Atlantic can only be encouraged to redouble their efforts, and their potential fees, by the $3 billion settlement with aggrieved shareholders that Tyco has finally agreed. Everyone else should be appalled.

When shareholders sue a company, for instance for issuing misleading information to the stock market, they are in effect suing each other. Unless settlements are covered by insurance, which would be prohibitive at this level, the winners merely extract money from other shareholders who are not party to the action.

In this American case, anyone who bought shares in the conglomerate near the top of the stock market boom, when Dennis Kozlowski was splashing $6,000 a time on shower curtains, is a potential beneficiary. Those who bought before December 1999 and lost equally from the frauds, now suffer a further hit, as do blameless investors who bought after the June 2002 cut-off. The fraud benefited only those who sold before the fall. They pay nothing.

Settling may suit today’s Tyco managers, because they cannot otherwise get on with breaking up this obsolete conglomerate. Like previous settlements, for instance at Shell, it tells investors to be the first in the suing queue: free advertising for lawyers.

— As his master moves on, the City Minister Ed Balls needs to establish his own political credentials more publicly. His new policy paper advocates hardheaded pro-Europeanism to pursue national interest. It stands or falls on delivery, so it was timely for Mr Balls to write to the EU yesterday urging greater efforts to make all members implement the single investment market under MiFID by the deadline in November. Don’t bet on it.

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