Since Michael Bloomberg’s earliest days in politics, he has faced questions about potential conflicts of interest posed by his business.
Photo: The Daily Memphian/Associated PressMichael Bloomberg’s financial-data and media company made him the ninth-richest person in the world and is the source of the wealth he has thrown into his presidential run. But it could become a political liability if he wins—one that might be difficult to resolve.
The potential conflicts of interest stemming from Bloomberg LP’s global operations could be extensive. China and Saudi Arabia have been among the fastest-growing markets for the company in recent years, according to people familiar with its operations, and governments everywhere supply critical data for its core product, financial terminals that cost $24,000 annually. Bloomberg LP generated an estimated $10.5 billion in revenue last year.
Mr. Bloomberg said that if elected, he would put his nearly 90% stake in Bloomberg LP into a blind trust where it would be sold. Finding a buyer for a company some analysts value at $60 billion—in an unprecedented process—won’t be straightforward. It would likely need to be an all-cash deal if the Democratic candidate is to avoid having an interest in the resulting firm after a combination. The pool of buyers who could afford it is small. Mr. Bloomberg has acknowledged that a transaction could take well into his first term to complete.
Mr. Bloomberg has faced questions about potential conflicts of interest posed by his business since his earliest days in politics. As mayor of New York, a city dominated by the same Wall Street firms that are his company’s biggest clients, he stepped aside from his management role but declined to sell his ownership stake and reserved the right to be involved in major financial decisions.
The stakes would be much higher if he were in the White House. Bloomberg LP has data terminals in banks, government offices and trading houses in more than 150 countries. It also relies, in part, on government ministries across the world for the macroeconomic and commodities-output data to supply its clients with up-to-the-minute information. The company’s news unit has reporters in 120 countries.
“Continued ownership of a business like this would leave any official vulnerable to outside influence,” said Walter Shaub, who ran the U.S. Office of Government Ethics during the Obama administration. “This is a question that has dogged Donald Trump since he took office, but the exposure for Bloomberg is even greater.”
Mr. Bloomberg is trailing front runner Bernie Sanders and former Vice President Joe Biden in the race for the Democratic nomination. He is banking on a strong performance on Tuesday, when 14 states hold primaries, and has spent several hundred million dollars of his own money on ads to sway voters.
Federal conflict-of-interest rules don’t require the president or vice president to divest themselves of holdings in the same way cabinet members must do. But Mr. Bloomberg has said he would sell his company, in part to draw a starker distinction between himself and Mr. Trump, who handed day-to-day control of his Trump Organization to his sons, but still retains full ownership of most of his businesses.
“He makes money from the things the federal government does. I will not have that problem,” Mr. Bloomberg told the “PBS NewsHour” in an interview that aired Thursday.
Mr. Bloomberg’s campaign said the first step would be placing the company in a blind trust. Typically, that is a vehicle where an outside financial manager controls a political official’s private assets, sells off those that pose a conflict, and reinvests the proceeds into vehicles unknown to the owner. In some cases, the conflicted assets are in a stock portfolio—in this case, the lone asset would be Bloomberg LP.
“The conflict doesn’t come from running it. It comes from benefiting from it financially,” Mr. Shaub said.
Finding a buyer who could afford a company of Bloomberg LP’s size would be challenging under normal circumstances. But this situation would be even more thorny. A $60 billion all-cash deal would be one of the largest of all time.
Analysts’ projected valuations for Bloomberg LP are based partly on the 2018 deal in which Thomson Reuters sold a 55% stake in its data business to a group led by private-equity giant Blackstone Group Inc. for $17 billion. The owners of the data business, now called Refinitiv, have since agreed to sell it to the London Stock Exchange for $27 billion, including debt.
For a private-equity buyout of Bloomberg LP, “the amount of debt and equity that you would have to raise would be pretty unprecedented,” said a person close to the Refinitiv deal. Blackstone’s Stephen Schwarzman, co-founder and chief executive of the private-equity giant, said at a Thomson Reuters conference in November that it would be “a huge stretch doing things over $50 billion.”
Some deal advisers say possible buyers might include exchange operators such as New York Stock Exchange owner Intercontinental Exchange Inc. or Chicago Mercantile Exchange owner CME Group Inc. Data companies such as IHS Markit Ltd. could be another option. These companies would likely need to issue equity, in addition to debt, to structure the transaction as all-cash. Spokespeople for the companies declined to comment. Warren Buffett’s Berkshire Hathaway Inc. was mentioned by some deal makers as a possible buyer, but Mr. Buffett said last month that he wasn’t interested.
Alternatively, a large tech company such as Amazon.com Inc., Microsoft Corp. or Alphabet Inc.’s Google could possibly afford it, according to Burton-Taylor International Consulting, a research firm that tracks financial-data companies. Spokeswomen for each of the companies declined to comment.
A Bloomberg campaign adviser, Tim O’Brien, told the Associated Press on Feb. 18 that Mr. Bloomberg wouldn’t sell to a foreign company or a private-equity group, which would narrow the field of suitors. A separate campaign aide wouldn’t confirm the restrictions outlined by Mr. O’Brien but said that if Mr. Bloomberg put the company into a blind trust, he would have no control over who it was sold to.
Any antitrust review would happen under Justice Department officials appointed by Mr. Bloomberg.
A buyer would gain control of a business that is highly profitable and stable, albeit one with slowing growth. Bloomberg LP controls about one-third of the financial-data market and records operating-profit margins as high as 30% in some years, according to Burton-Taylor. Bloomberg LP’s revenue has nearly tripled over the past 15 years, although growth has slowed since 2015, the research firm found.
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If he were to be elected, Mr. Bloomberg would have to deal with countries, such as China and Saudi Arabia, that are emerging as crucial markets for his company. Nearly 50% of the roughly 325,000 terminals Bloomberg has sold are in the U.S. and the U.K., but growth in those markets has slowed, people familiar with the company’s financials said.
In comparison, China represents less than 2% of the company’s total financial-terminal sales, and Saudi Arabia less than 1%, but both are growing, the people said.
Mr. Bloomberg drew criticism in September for saying China’s leader, Xi Jinping, was “not a dictator.” The comment elicited barbs from several other candidates at the recent Democratic presidential debate in South Carolina.
In 2013, Bloomberg’s news unit became embroiled in controversy over a decision to not publish some stories that examined wealth and alleged corruption within China’s leadership. The company said the stories didn’t meet publishing standards, although some in the newsroom felt the decision was driven by concerns that the stories could hurt Bloomberg’s business in the country, former employees said.
In Saudi Arabia, Bloomberg announced a partnership with the Saudi Research and Marketing Group to launch an Arabic-language business- and financial-news service throughout the Middle East. The company, called Bloomberg Asharq, has yet to launch.
If Mr. Bloomberg were to find a buyer under the rules laid out by the Office of Government Ethics, he might be eligible for a possible tax deferral from the Internal Revenue Service, tax experts said, though the answer is uncertain because presidents aren’t required to make divestments. The sale proceeds would have to be invested in certain approved investment vehicles such as Treasury bills, municipal bonds, index funds and certain mutual funds. The potential tax bill would only come due once Mr. Bloomberg sold the subsequent investments. Mr. Bloomberg said he would ultimately give all the proceeds from the sale to his charity, Bloomberg Philanthropies.
The government ethics office “would go as far as they possibly felt they could to make sure that there’s not a tax disincentive to doing the right thing,” said Brad Malt, the lawyer who ran Mitt Romney’s blind trust during the 2012 presidential campaign.
—Cara Lombardo and Richard Rubin contributed to this article.
Write to Lukas I. Alpert at lukas.alpert@wsj.com and Miriam Gottfried at Miriam.Gottfried@wsj.com
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