Reuters disclosed on Friday that it had received a "preliminary approach" for the business after bid speculation raised its share price.

Thomson and Reuters have now released a joint statement outlining the proposed merger, which would create a combined entity called Thomson-Reuters, headed by Reuters chief executive Tom Glocer. Thomson president Richard Harrington would retire after closing of the transaction.

According to unconfirmed press reports Glocer stands to make £35 million from the deal, as he holds almost 10 million share options and owns a further 401,345 shares outright.

Under the terms of the merger proposal Thomson would pay 352.5 pence in cash plus 0.16 of a share for each Reuters share. In addition Reuters shareholders will receive a dividend of 12 pence for 2007.

Based on the closing Thomson share price on Thursday - the day before Reuters disclosed the bid approach - this would value each Reuters share at 705 pence, a 43% premium to Reuters closing share price on Thursday.

But based on the closing Thomson share price and exchange rate on Monday the deal values each Reuters share at 697 pence.

The Thomson family, through its private holding company Woodbridge, would hold a 53% stake in the combined business, while Reuters shareholders would retain 24% and other Thomson shareholders holding 23%.

The merger is expected to generate more than $500 million in annual cost savings within three years, says the companies.

The combined group would maintain dual-listing, with identical boards consisting of 15 directors, five of which will be from Reuters.

The Thomson Financial unit would be combined with Reuters' financial and media businesses to form an entity called 'Reuters', which would adopt the Reuters trust principles aimed at protecting the editorial independence of news output.

In the joint statement the companies say that "much has still to be resolved" but add that there is "a powerful and compelling logic for the combination which would create a global leader in the business-to-business information markets".

The deal - which creates an effective duopoly in market data terminal provisioning between the combined Thomson/Reuters entity and Bloomberg - is expected to undergo regulatory scrutiny in Brussels and Washington.