LONDON (AP) – News and information company Reuters Group PLC and financial data provider Thomson Corp. confirmed Tuesday that they are discussing a combination of their businesses that values Reuters at more than $17 billion.

Reuters Chief Executive Tom Glocer, who led a cost-cutting drive at the company and has sought to boost revenue by targeting markets outside its traditional terminals business, would head the new company, both companies said.

Thomson would pay 352.5 pence ($7.03) in cash and 0.16 Thomson share for each Reuters share. That valued Reuters at 705 pence per share, based on Thomson’s closing price on Thursday, the day before the takeover bid was disclosed. But a subsequent drop in Thomson shares has reduced the worth of the deal, and both Thomson and Reuters shares fell sharply in American trading on Tuesday.

The two companies said in an announcement to the London Stock Exchange that there was a “powerful and compelling logic for the combination, which would create a global leader in the business-to-business information markets.”

But “much has still to be resolved and there can be no assurance that agreement will be reached,” they added.

Thomson, Reuters and Bloomberg LP compete in providing data terminals to the world’s major banks and brokerages. Reuters, which also has a general news service, was the market leader for many years, though it has steadily lost ground to Bloomberg.

By combining with Reuters, Thomson would rival Bloomberg in market share. An April report from Inside Market Data Reference said Bloomberg has 33 percent of the market share, with Reuters at 23 percent and Thomson at 11 percent.

The projected savings of a Reuters-Thomson combination, $500 million within three years, “is greater than we would expect to be deliverable in a deal with any other suitor,” said Charles Peacock, analyst at Seymour Pierce in London.

A rival bid could emerge, Numis Securities said, but it also noted the expected synergies and said Thomson was “the bidder best placed to secure Reuters.”
,p>Woodbridge, the Thomson family holding company, would own approximately 53 percent of Thomson-Reuters, other Thomson shareholders would have 23 percent and Reuters shareholders about 24 percent, the companies said.

Richard Harrington, Thomson’s president and chief executive, would retire when the transaction is completed, the companies said.

Investors could be worried that Thomson may be overpaying. Its American shares fell $2.47, or 5.8 percent, to $40.36, in morning trading on Tuesday, and Reuters shares that trade in the U.S. fell $2.68, or 3.5 percent, to $73.82.

Thomson, based in Stamford, Conn., has transformed itself in the last decade from an owner of newspapers and other print products. It has built up its legal information business, and is about to sell Thomson Learning, its book division for about $5 billion.

The company has 32,000 employees and had sales in 2006 of $6.6 billion.

While Reuters is known internationally for its general news operation, that is just a small part of its business. Of the company’s 2006 revenue of $5.11 billion, only $338.3 million came from the media segment – although its news is a key selling point for terminals as well.

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On the Net:

Reuters, http://about.reuters.com

Thomson, http://www.thomson.com