Chairman of Thomson Reuters David Thomson, right, and President and Chief Executive Officer Jim Smith.FRED THORNHILL/Reuters
Thomson Reuters Corp. plans to spend up to $1-billion (U.S.) to buy back shares because it has no big plans for acquisitions, and has enough funds to support internal growth.
Chief executive officer Jim Smith told shareholders at the company's annual meeting in Toronto Wednesday that the firm is generating cash, and "in the current M&A environment, we find great value in buying back our shares at the current level, compared [with] the multiples that some acquisition targets are commanding in the marketplace."
Earlier in the day, Thomson Reuters had announced that it plans to spend as much as $1-billion to buy back common shares before the end of 2016, in addition to the $1-billion worth of shares it has repurchased since July, 2014.
In response to a shareholder who suggested the money might be "more constructively invested in growing the corporation," Mr. Smith said the management and board feel "we have adequate resources within the company right now to fund the next legs of the journey that we are on."
The buyback "is a prudent lever for us to pull at this time," Mr. Smith said. The company will revisit its plans for deploying capital after it works on its broader corporate strategy this summer, he added. "We do believe we have adequate resources to support our growth opportunities today."
Acquisitions, which in the past were made at a furious pace, have been reduced significantly in the past two years. The company is now focused on "exploiting the things we already do well," Mr. Smith said.
He told the meeting he has simplified the conglomerate, and it is now in a position to take advantage of clients' desire to mine "big data" and their need to deal with complex legal and regulatory environments. The company is also integrating its various divisions that sell technology and information to financial institutions, legal and tax professionals, consultants and scientists.
"Increasingly, the needs of our customers transcend industries," he said. "Lawyers need access to financial information, tax professionals need legal precedents, media need access to data and traders act on news, legal verdicts and even social-media sentiment."
Mr. Smith acknowledged that one of his biggest worries as the leader of a technology-dependent company is about cyber attacks. "We have stepped up, in a major way, our planning and the resources we put behind cyber security," he said. "It has been raised to a board-level oversight function."
Thomson Reuters was formed through the 2008 acquisition by Thomson Corp. of Reuters Group PLC. That $17-billion merger happened just as the global financial crisis was taking hold, and the company stumbled in the following years. It has been cutting costs and restructuring to get back into growth mode.
In its most recent quarter, revenue fell 3 per cent to $3.04-billion, mainly because of the strength of the U.S. dollar. Without those foreign-exchange headwinds, revenue would have risen about 2 per cent.