View from City Road: Reuters shows

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some realism Faced with an embarrassment of riches, Reuters Holdings has done the decent thing and given shareholders the option of scooping up some of its pounds 700m to pounds 800m cash pile for themselves or of staying put to enjoy a slightly more concentrated shareholding in the company.

It may be a far cry from the past, when Reuters made its fortune by brave leaps into the dark, but top Reuters management is displaying a welcome sense of realism.

Sir Christopher Hogg, chairman, and Peter Job, chief executive, are prepared to ignore allegations that they have run out of imagination - they will undoubtedly take the opportunity of today's results to paint an appetising picture of new product development - or the temptation to run Reuters as a bank.

In keeping with the cautious times, they are eschewing large and possibly fatal mega-acquisitions outside their established field of expertise in favour of pouring Reuters' considerable future cash flows into the extension of existing business interests.

Anything over and above the sums needed for that is being handed back to shareholders.

For tax-exempt funds, which take up 35 per cent of the share register, there is the added bonus of a tax break. According to Reuters and its advisers, SG Warburg and JP Morgan, the offer by tender rather than open-market purchase will generate tax credits and therefore tax refunds for gross income funds.

An open-market purchase, a la BAT Industries, would not have produced the same windfall for tax-exempt funds - as many complained at the time of the BAT buy-back.

It was this tax wrinkle that caused Reuters Holdings' share price to spring 36p higher to 1,440p, after 1,455p, yesterday rather than any dramatic enhancement to earnings from the repurchase. Since only 5.8 per cent of the issued Reuter share capital is under the hammer the impact on the bottom line will be correspondingly small.