What'll Bloomberg Do with Bloomberg?
As Michael R. Bloomberg entered a midtown hotel elevator on the night of his victory in the New York mayoral race, former Governor Hugh L. Carey pulled him aside and recounted a bit of history for the 59-year-old billionaire. Back in 1880, the city elected as mayor William Russell Grace, a shipping magnate with no political experience. Grace would spend mornings in City Hall, Carey told the mayor-elect, and afternoons down the street tending to his business, W.R. Grace & Co. Bloomberg, who remains CEO of the privately held company he founded 20 years ago, laughed at Carey's story, then vowed that, as the Big Apple's 108th mayor, he wouldn't be pursuing dual careers.
Still, extracting himself from Bloomberg LP, in which he holds a 72% stake, could become Bloomberg's first messy challenge even before he's sworn in on Jan. 1. Speculation is already rife that he is considering selling his company, perhaps for an asking price of more than $10 billion. A Bloomberg spokeswoman denies the company is for sale, but either way, Bloomberg's departure could mean turmoil for the $2.5 billion-a- year financial-data-and-media empire.
Bloomberg will be leaving his company to an executive team that has been around for years, but no one member possesses the outsized personality that has helped make the Bloomberg name and terminals ubiquitous on Wall Street. Bloomberg also leaves amid the worst economic downturn in a decade. Analysts are predicting that the company's sales growth of 15% in 2000 will be cut in half next year. And rival Reuters PLC is gaining market share and charges lower prices for its financial data. Bloomberg's departure "has got to hurt," says John A. McConville, editor of quarterly guide Market Data Industry. "You're removing an egotistical and charismatic leader. Whatever he brought to the table is now gone."
Bloomberg as mayor is raising ethical issues as well, since he owns a company whose biggest customers are the investment houses that bid regularly to underwrite city bonds. Merrill Lynch & Co. (MER ), his only outside partner, with a 20% stake, is a senior underwriter of city bonds and in 1997 received $27.6 million in tax abatements for promising to keep 9,000 jobs in New York City. Merrill officials declined comment. (Bloomberg has said he won't seek tax abatements for a new 700,000-sq.-ft. headquarters to be completed in 2004.) Bloomberg aide Bill Cunningham sees no conflict with selecting underwriters: "Ultimately there is no conflict [because] they all lease Bloombergs," he says. But the mayor-elect will have "to be extremely careful not to show favoritism," warns Columbia University finance professor David O. Beim, a business ethics specialist.
NO BLIND TRUST. Bloomberg has said he will abide by the decision of the city's Conflicts of Interest Board, which in the coming weeks is expected to review his holdings. The decision will be made by board members Jane W. Parver, a partner at law firm Kaye Scholer LLP, and Bruce Green, a Fordham University law professor. A third board member, Benito Romano, is likely to recuse himself since his law firm, Willkie Farr & Gallagher, has worked for Bloomberg LP and defended him and the company against three sexual-harassment lawsuits by former employees. Parver, Green, and Romano declined to comment.
Many politicians with business interests opt to put their investments in blind trusts while in office, but because Bloomberg's stake is so large and not in public stock, a blind trust wouldn't solve the problem. The conflicts board could let Bloomberg keep his stake but place tight restrictions on how and when, as mayor, he deals with Wall Street firms that are also Bloomberg customers. But such constraints would undermine his main appeal to voters: his business savvy that has become so critical to the city's post-September 11 economy.
"A BIT RICH." The conflicts board could also go to extremes and require him to sell outright. Company insiders value the privately held empire at north of $10 billion, or roughly four times revenues. In addition to the Bloomberg wire service, there are magazines, radio and TV operations. About 95% of annual revenues, however, come from leases on 160,000 terminals. The "Bloombergs," as they have come to be known, provide traders, brokers, and financial analysts with reams of information, from breaking news reports to complex analytics. "This is still a great asset, but that price is a bit rich," says one media investment banker. "Their margins won't stay where they are."
So who would be interested? Thomson, Dow Jones, Reuters, Pearson, and The McGraw-Hill Companies, the parent of BusinessWeek, are some of the names in circulation. A Dow Jones spokesman says his company has no interest. Spokespersons for the other companies declined to comment. If it's not an all-cash deal, Bloomberg could still find himself in a predicament--by holding stock of another company with ties to the city.
The job of guiding Bloomberg into its third decade will most likely fall to Lex Fenwick, the company's former head of U.S. and European sales who was appointed chief operating officer in June. When Bloomberg resigns as chief executive, Fenwick will probably be elevated. But as the company prepares to yank Mike Bloomberg's signature from the first screen of its terminals, where it has been displayed for years, don't expect Fenwick's to fill that space. After all, the company is still called Bloomberg.
By Tom Lowry in New York