Reuters Ltd. and Equant NV are forming a financial information services and e-commerce network as part of a joint venture with an initial investment of US$360 million, the companies announced.
The new company, provisionally named “Proton,” will combine Reuters’s financial service content with Equant’s global IP network business, to bring the financial services industry news, information and business-to-business (B2B) e-commerce services over a secure IP network, the companies said in a joint statement.
The company, based in New York, will announce its official name when it launches operations in mid-2000, said Doug Gilstrap, the CEO of the new company, in the teleconference.
“The new company is about putting together the elements from two leading companies. Reuters is leveraging its great asset in our financial services content to create a substantial business with a great partner,” said David Ure, an executive director at Reuters, in a press teleconference. Ure will be non-executive chairman of the new company.
U.K.-based Reuters will own 51 per cent of the new company, investing an initial US$130 million, and Netherlands-based Equant will own 49 per cent with an immediate investment of US$230 million, the companies said.
“We view Reuters as a sort of dream ticket and expect to expand on that network created by the new company. The new company will capture the demand for network services in the financial community,” Equant spokesman Duncan Lewis said in the teleconference.
The financial business sector can use the network for conducting transactions and engaging in e-commerce with their retail customers quickly and securely, Lewis said
Four hundred staff members from Reuters will join the new company and Equant will contribute 100 of its employees, the companies said.
Additionally, based on its 10-year contract to provide networking services to the new joint venture, Equant revised its revenue outlook. The company expects the contract to bring in the more than US$100 million of new business for Equant in its first full year of operation, Equant said in a separate statement.
The new company is expected initially to generate more than US$400 million in annualized revenue, according to a joint statement form the companies.
In related news, Reuters announced in February that it would invest US$799 million over four years to significantly expand its on-line and wireless ventures in the United States and Europe.
“The Internet has opened up two big opportunities for Reuters. It has enabled us for the first time to start serving an infinitely wider market, including individuals making financial decisions at home and at work,” said CEO Peter Job in a statement. “It has also allowed us to adopt a more cost-effective model for our base business.”
To raise money for new projects, Reuters is preparing to publicly offer stock in two of its businesses. The company said it had begun preparing to sell shares of its Greenhouse Fund, which has invested more than US$130 million since 1995 in Web portals such as Yahoo and Infoseek, as well as in technology firms whose products help other firms engage in e-commerce. Reuters also said it is “actively considering” going public with Instinet, an electronic service that facilitates trading between buyers and sellers of equities and securities.