New York, NY – Last Thursday, Bloomberg, L.P., the New York-based financial information and media giant, announced the largest acquisition in the company’s 30-year history, with a $990 mln bid for BNA, a privately owned legal, tax and regulatory information company originally known as the Bureau of National Affairs.
Background on BNA
Founded in 1926 by newspaper reporter David Lawrence, BNA produces 250 subscription-based information products which provide legal, tax, regulatory and environmental news and research to professionals in those fields. BNA employs 1,465 people, according to a company statement.
Some of BNA’s publications for lawyers, accountants, government workers and others include the Daily Labor Report, Daily Tax Report and Labor & Employment Law Library. Legal, tax and regulatory publishing generated 79% of BNA’s 2010 revenue.
Terms of the Deal
Under the terms of the deal, Bloomberg will pay $39.50 per share in cash through a tender offer which is expected to begin on September 8, 2011. Investors holding a majority of the shares would have to accept the deal.
The per share offer would value BNA at approximately $990 million. Based on the fact that BNA reported net income of $27.6 million on $331 million in revenue in 2010, the terms of the deal represents three times 2010 revenues or thirty-six times last year’s earnings – an extremely high premium that very few other companies could compete with.
Bloomberg said it expects the transaction to close in 2011. After the deal, BNA will remain a standalone subsidiary.
Reasons for the Acquisition
Bloomberg’s acquisition of BNA is part of the firm’s push into the legal research business enabling it to better compete with Thomson Reuters Corp.’s Westlaw, Reed Elsevier’s LexisNexis, or The Economists’ CQ Rollcall.
Bloomberg executives said that the acquisition will strengthen the company’s legal offerings by pairing Bloomberg Law with BNA’s legal, tax and regulatory content. Executives also said the deal will bolster Bloomberg’s coverage of other issues such as labor and employment, healthcare and telecommunications.
Bloomberg’s move into legal and regulatory information is part of a larger diversification push by the firm. Over the past three years, Bloomberg has been aggressively trying to diversify its business away from its core subscription service selling financial data, news and analytics to Wall Street professionals.
Thomson Reuters, who also operates in the financial services, legal, tax and accounting markets has found this kind of diversification to be quite beneficial. For example, in 2010 revenue in Thomson Reuters’s markets division slipped 1%, while revenue grew 3% in its legal unit, and 7% in the tax and accounting division.
Bloomberg’s move to become less dependent on its core financial services product has not gone as quickly as hoped. After Bloomberg launched its diversification efforts, the percentage of revenue coming from its core financial services market declined from over 90% of the firm’s business to as low as 83%. However, recently that percentage has risen back up to over 85% of the company’s $7 billion in annual revenue, indicating that some of Bloomberg’s newer products might not be growing as well as expected.
The BNA acquisition is considerably larger than Bloomberg’s recent acquisitions. For example, in 2009, Bloomberg acquired BusinessWeek for less than $5.0 mln plus the assumption of debt. Also in 2009, the firm purchased New Energy Finance, though the terms of the deal were not disclosed. Bloomberg management have indicated that future growth will come from internal initiatives rather than from additional large acquisitions.