Reed must think twice before buying the volatile Bloomberg

George Pitcher is joint managing director of media consultancy Luther Pendragon

I hope that one day I’m powerful enough, in a corporate sense, for people to talk of my short fuse and fiery temper. There are very few top people in business, and especially few in media businesses, who are described as placid.

Stories of rage are probably apocryphal. Long before his chairmanship of the stately English Heritage, and even before he was a director of this tranquil publishing house, Jocelyn Stevens was said to have thrown telephones out of windows during his days as player-manager of Queen magazine.

Similarly, it is said that the founder of the global information group, Bloomberg Business News, is not a man of Franciscan gentility. One old Bloomberg hand advises that on entering a room with Michael Bloomberg it is always worth checking the length of the cord on the telephone, and staying at least that distance away from him, since he has a habit of throwing phones. Presumably, if he’s carrying a mobile, you’re doomed.

Whether temper and talent are related has not been satisfactorily investigated, but if Bloomberg is said to possess more than his fair share of the former, he has begun to look like he has cornered the market in the latter. Bloomberg walked out of Wall Street’s Salomon Brothers in the early Eighties having made enough for a small neighbourhood to retire on. Instead of taking it easy, he founded the real-time financial information network that now supplies some 53,000 screens worldwide and, though figures are hard to come by since Bloomberg remains privately-owned, is reckoned to be worth some $3bn (2bn).

Now it seems that Anglo-Dutch combine Reed Elsevier is moving towards a formal offer for Bloomberg. The rumour has been circulating for some time and the circumstantial evidence is strong. Reed sold most of its consumer businesses last year, raising a cash-pile of something in excess of 750m in the process. At a current share price of around 1170p, Reed is worth some 13.5bn.

Profits last year rose 19 per cent to 736m and at the interim stage to the end of June this year, pre-tax profits rose 13 per cent to 417m on a six per cent reduced turnover of 1.7bn. Reed is in good shape and has made no secret that it is on the US acquisition trail. Given the expansion of the online information market, Bloomberg looks an obvious fit.

And yet, I wonder. I have no empirical evidence to be bearish about the deal’s prospects, but there is something atmospherically wrong with it. I am not talking about arithmetic or analysis here, but about reading the runes. It’s hard to describe, but I feel like the old maiden aunt before a wedding, muttering into my gin that “no good will come of it”.

Take the point to which I have already referred partially: Michael Bloomberg is an extremely flamboyant individual. Nothing wrong with that – the odd land-line to the cranium has never, as far as we know, left any lasting impression. But it is worth asking whether Bloomberg is not only eponymous with its bright, young founder – is it synonymous with him as well?

Bloomberg the man owns 70 per cent of Bloomberg the company, with Merrill Lynch holding the balance, but that’s not really what I mean. When you enter any of Bloomberg’s main offices around the world, you are greeted by exotic, tropical fish in tanks perfectly lit by a backdrop of state-of-the-art screens and technology. “Stepford” employees recite to you the terms of business, and you almost expect to meet someone called Blofeld, rather than Bloomberg, stroking a white Persian cat and saying: “Ah, my friends Reed and Elsevier, I have been expecting you – it is a shame that I will have to kill you now.”

Bloomberg is not quite a cult, but it undoubtedly carries the stamp and character of a distinctive individual. Its employees are evangelistic. Anyone seeking to acquire it should think long and hard about how much value and potential might walk out of the door with its founder.

Then there is Reed’s recent online experience in the US with Lexis-Nexis which, again, sounds like a baddie in a Bond film, but is in fact Reed’s US data subsidiary. In what is considered to be the first mass demonstration against a single company in the digital age, Reed’s telephone lines were last month quite literally jammed with complaints of intrusion into private lives. It’s one thing to publish magazines – quite another to be a pioneer in online services.

Then, again, there is the competition. Reuters, initially slow to get its act together in response to the threat from new upstart Bloomberg, is now performing well in the financial services where Bloomberg stole a march. It’s also worth mentioning that the world’s major telephony operators have yet to show their hand in digital delivery of financial information.

Of course, if Reed does do a deal with Bloomberg, it might offer its founder paper in the new company, tying in the talent and the brand. But there is more than enough for institutions to worry about in a deal such as this.

These are only gut feelings, so I might be wrong. And if I suffer an injury from a flying telephone, you’ll be none the wiser. I could have been very right or very wrong.

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