Big Reuters holder, ValueAct, may support sale

By Dane Hamilton

NEW YORK (Reuters) - The second biggest shareholder in Reuters Group Plc RTR.L RTRSY.O , ValueAct Capital, would support a sale of the news and information company, depending on the offer, a partner in the hedge fund said.

Reuters said on Friday it had received an approach from a possible buyer, sending its shares soaring amid speculation that the bidder was Canada's Thomson Corp. TOC.TO.

Jeffrey Ubben, ValueAct managing partner, said in an interview that it would be a "fabulous combination" if Reuters merged with the Canadian publishing group.

But Ubben said his fund believed Reuters would be an "eight pound stock in a few years" even without a sale. On Friday, the shares closed at 615.75 pence, up 25 percent.

ValueAct, which has about $4.6 billion (2.3 billion pounds) under management, holds 83.5 million Reuters shares, just behind Schroder Investment Management, according to regulatory filings.

Ubben said Reuters had made big cost cuts and significant investments in its technology infrastructure in recent years that are not reflected in its current share price.

"There's a wide gap between the earnings potential and the current market value," Ubben said.

In particular, he said the company's foreign exchange trading operations were not being valued on a par with companies that have similar offerings.