Cross-border case study: Thomson/Reuters merger

Slaughter and May advised Reuters Group PLC ("Reuters"), a global provider of intelligent information, on the combination of its business with the Canadian provider of information services, The Thomson Corporation ("Thomson"), to form Thomson Reuters.

On 15 May 2007, the boards of Thomson and Reuters announced that they had agreed to combine the two groups by way of a dual listed company ("DLC") structure. This was to be the first UK-North American DLC and Niall FitzGerald, Chairman of Reuters, said that "the shared expertise and complementary strengths of these two companies makes for a strategically compelling and financially attractive combination".

Slaughter and May worked closely with Reuters to develop a structure which would ensure the continued involvement of Reuters shareholders in Thomson Reuters. The DLC was created through contractual arrangements between the parties which equalised the economic rights of shareholders on both sides of the DLC while allowing the combined shareholder body to vote together on most resolutions of the two parent companies. The two listed parent companies of Thomson Reuters are separate legal entities, one listed in Canada and the other in the UK, but they are managed and operated as a single economic enterprise by a single executive management and identical boards of directors.

The transaction was implemented by way of a scheme of arrangement and involved the insertion of a new holding company on top of Reuters as a tax-efficient means to pass the cash consideration to Reuters shareholders and to assist in creating sufficient distributable reserves for the UK arm of the DLC. Slaughter and May also advised Reuters and Thomson on the restructuring of the Thomson Reuters group associated with creating the DLC.

The transaction involved lawyers from various specialities within Slaughter and May including corporate, pensions and employment, litigation, tax, regulatory and commercial real estate. Slaughter and May also sought advice from approximately 35 jurisdictions throughout the world on a range of issues including securities issues and employee consultations.

Over a period of almost 12 months Slaughter and May worked very closely with Reuters' advisers in Canada in devising the structure and encountered a number of significant hurdles as part of the transaction, including:

• creating a corporate structure in compliance with the UK, Canadian and US corporate listing regimes
• adjusting the traditional DLC structure to cope with significant constraints afforded by Canadian and US tax regimes
• preserving the Reuters Trust Principles in the DLC constitutions. These are integral to the preservation of the independence, freedom from bias and integrity of the Reuters news and information service and are monitored by the Reuters Founders Share Company, an independent body whose support was required to achieve the deal
• creating a document for Reuters shareholders which satisfied requirements of a UK scheme of arrangement, the UK Takeover Code, the UK Listing Rules and the Prospectus Rules to provide shareholders with just one circular

The deal completed on 17 April 2008. For more information please contact your usual Slaughter and May adviser.