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Reuters Greenhouse to MBO?

As Reuters’ new CEO shakes up the information group, an MBO for its Greenhouse Fund looks increasingly likely.

With sweeping job cuts forming a key part of incoming CEO Tom Glocer’s aim to win £150m of annual savings from Reuters, its corporate venturing arm is now said to be being readied for a management buy out.

Headed by Reuters veteran John Taysom alongside more recent recruit and co-CEO David Lockwood, the Greenhouse Fund has figured large in media coverage of the information group as its investments have risen and fallen in value. Lauded for having invested early in some of the most prominent internet companies – including Yahoo and Verisign – the fund has also been caught in the crossfire as investors retreated from the internet sector and the fund’s numerous internet investments looked far less valuable than before.

As a result Reuters’ share price gained an unwelcome degree of extra volatility as the market speculated as to the value of the Greenhouse portfolio. “There was a time recently” commented one analyst “that everyone was gossiping about how many skeletons the Greenhouse Fund had in its cupboard – it’s not so common now but I’d still like to see what valuations they’re putting on some of their companies. Some still look pretty sick.”

Taysom and Lockwood are predicted to lead the MBO, with Lockwood’s 10 year stint at Goldman Sachs prior to joining Reuters in January 2000 proving to be of especial relevance. Although no details have been released on the MBO structure or its schedule, analysts are predicting that Reuters will want to move fast. Besides Glocer being described as a “man in a hurry”, the Greenhouse team are also said to be keen to gain greater independence.

There had been rumours that Reuters would want to try and float the Fund, following in the tracks of its successful IPO earlier this year of Instinet, its agency broking business. An MBO seems an effective means at once to enable Reuters to realise value from the Fund whilst providing the Greenhouse team a compelling means to benefit from the business’ growth.

Last month PEO reported on the Fund’s plans to launch a second £250m fund later this year that would, in direct contrast to the original fund, invest in companies whose products and services would not complement Reuters own activities. See: 30/05/01 – Greenhouse to spin out new fund

The original Reuters Greenhouse fund has invested about $400m and recouped some $270m. CSFB values the unrealised assets in the Greenhouse portfolio at about $300m.