No price was put on the sale, but Citicorp has lost millions of dollars on Quotron since it was acquired in 1986 for dollars 680m, including a dollars 400 write-down in October 1991 that accounted for half the bank's losses that quarter. Citicorp, which will retain Quotron's foreign-exchange and electronic-broking services, said it would take a dollars 179m write-down to cover the sale costs.
The purchase, which has been rumoured since before Christmas, may initially dilute the earnings of Reuters holders, but appears to be an excellent strategic move. Acquiring Quotron's market-data services, which serve 30,000 brokerage and investor terminals in the US, caps Reuters' recent drive into the equities-quotation business and gives it access to a new distribution channel for Instinet, its after-hours electronic trading system.
Reuters, whose existing equity-quotes business in the US is quite small, has considerable room for cost savings through consolidation and economies of scale. The entire market-data industry also stands to benefit from the disappearance of Quotron, which has priced its service aggressively in the face of competition from Dow Jones's Telerate, ADP, Bloomberg and a raft of discount services.
Reuters sought to play down the news, noting the deal was in principle, and was conditional on a number of unspecified matters. A spokesman said it was premature to discuss any eventual merger of the Quotron service, saying only that a further announcement would be made shortly.
Analysts say Quotron has important franchise value, despite the difficulty it has had competing with the newer technologies offered by rivals. The unit has been the object of sale rumours since the 1991 write-down, when Citicorp conceded the service had been dragging down its earnings by about dollars 200m annually.
A year ago, Citicorp sold Quotron's international equities business - a more direct rival to Reuters - to ADP for an undisclosed amount, giving that US- based company a presence in Europe. The deal was thought to be a necessary preparation for the sale of the rest of Quotron to Reuters, although Citicorp officals said the sale allowed Quotron 'to concentrate its energies on operations central to its business strategy'.
In American depositary trading in New York, Reuters shares were up dollars 7 8 at dollars 83.Reuse content