August 26, 2011

The Wall Street Journal

Bloomberg to Snap Up BNA

$990 Million Deal Furthers Publisher's Push Into Legal Research Business.

Bloomberg LP agreed to acquire legal-research firm BNA in a deal valued at about $990 million, a bold move in the financial information company's evolving efforts to diversify its business.

The deal, announced Thursday for $39.50 a share in cash, is Bloomberg's largest-ever acquisition and is aimed primarily at bolstering the company's recent entry into the market for electronic legal research.

Bloomberg said it expects the transaction to close in 2011, though it still has to be approved by current and former BNA employees, who own the Arlington, Va., company.

Bloomberg LP, whose headquarters are shown above, center, has been looking to diversify its business.

Over the past couple of years, Bloomberg has made an aggressive push into the legal research arena, hiring a stable of lawyers to develop a product that organizes cases, laws and other information for lawyers.  To make inroads against Thomson Reuters Corp.'s WestLaw and Reed Elsevier's LexisNexis, the two services that dominate the sector, Bloomberg offered prominent law firms and law schools free trials and a simpler pricing structure.

Bloomberg's venture into law is part of a broader company initiative launched three years ago to un-tether the company from its core subscription service that feeds financial data, news and analytics to Wall Street professionals for about $20,000 a year.  At the time, the onset of the economic downturn was threatening demand for the product, which accounted for 90% of the company's revenue, although terminal subscriptions have since picked up and reached a record 300,000 earlier this year.

Bloomberg has launched a series of products including Bloomberg Government, a service that helps lobbyists and others track and analyze the impact of government policy on business, as well as a statistical-analysis service for the sports industry.  Bloomberg also acquired BusinessWeek magazine, since renamed Bloomberg Businessweek, in 2009 in part to expose more consumers to its news products.

Bloomberg's move to become less dependent on the core product has not gone as quickly or smoothly as some analysts expected.  Douglas B Taylor, managing partner of market-data research and consulting firm Burton-Taylor International Consulting LLC, estimates after Bloomberg launched its diversification efforts, the percentage of revenue coming from the core financial product declined to as low as 83% from over 90%.  "So they were actually chipping away," Mr. Taylor said.
But more recently, that percentage has ticked back up to over 85% of the company's $7 billion in annual revenue, indicating some of Bloomberg's ancillary products might not be growing as quickly as Bloomberg hoped, Mr. Taylor said.

Overall revenue at Bloomberg increased 10% last year.

By acquiring BNA, or Bureau of National Affairs Inc., Bloomberg is redoubling its efforts to unseat Thomson Reuters and Reed Elsevier, and carve out a significant piece of the legal-research market.  Founded in 1929, BNA has more than 600 reporters, lawyers and editors who publish legal, tax and regulatory research and analysis. BNA reported net income of $27.6 million on $331 million in revenue in 2010.

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.

"BNA's employees have built a superior franchise and we are enthusiastic about a Bloomberg-BNA combination that will deliver more premium content to our professional audiences," said Dan Doctoroff, CEO and President of Bloomberg, in a release.  "BNA research and analysis will make Bloomberg's products even more valuable, and BNA would benefit from our data and technology expertise."

Bloomberg said it will operate BNA as a standalone subsidiary.

Evercore Partners advised BNA on the deal.

Bloomberg said the tender offer is expected to commence by Sept. 8 and that the acquisition is dependent on at least a majority of BNA's Class A shareholders tendering their shares.
by Russell Adams