By Frank Ahrens
Washington Post Staff Writer
Wednesday, May 2, 2007
Rupert Murdoch's News Corp. has made an unsolicited takeover bid for the parent company of the Wall Street Journal, an offer that generated nearly instant resistance from the company's controlling family and set up a media culture clash.
The offer seeks to marry the pinstriped Journal, widely regarded as the paper of record for the U.S. economy, and Murdoch's News Corp., home of "American Idol," Fox News Channel's Bill O'Reilly and the New York Post tabloid.
For Murdoch, the Journal would be a key component of the business news channel, a rival to CNBC, that he plans to launch on cable this year.
But first, Murdoch must persuade the Bancroft family, which controls more than 60 percent of Dow Jones & Co. voting power.
In a brief statement yesterday afternoon, Dow Jones director Michael B. Elefante -- the Bancrofts' representative on the board -- said family members and trustees told him that they would vote against Murdoch's proposal.
The board said it would consider the Bancroft opposition when considering Murdoch's offer, which at $60 a share represents a substantial premium over the stock's trading value. In a television interview yesterday, Murdoch said he hoped the Bancrofts would "take it calmly and think about" the offer. Dow Jones stock over the past year has traded in the $30s and topped $60 only once, in 2000, before the Sept. 11, 2001, terrorist attacks sent Journal advertising and Dow Jones shares down.
"There's plenty of time," Murdoch, 76, said during an interview on Fox News Channel's "Your World With Neil Cavuto."
The bid would offer cash or a mix of cash and stock for all outstanding Dow Jones stock, which closed Monday at $36.33 a share. The stock price rose 55 percent yesterday, to $56.20, after the bid. Murdoch's offer would be worth at least $5 billion, including existing debt. Late yesterday, News Corp. confirmed that the offer remained in place.
"It's a generous offer," Murdoch said. "We are the sort of people with the same traditions that I think will prove great guardians for this paper."
Some quarters disagreed.
"If Murdoch gets control of the Wall Street Journal and Dow Jones and if he follows the pattern of his past acquisitions, he will use the Wall Street Journal to serve his own purposes, financial and political," Ben H. Bagdikian, author and former dean of the journalism graduate school at the University of California at Berkeley, said in a statement.
The union representing Journal employees also opposed Murdoch's bid.
"Mr. Murdoch has shown a willingness to crush quality and independence, and there is no reason to think he would handle Dow Jones or the Journal any differently," read a statement from Independent Association of Publishers' Employees.
Murdoch's politics could be a match with those of the editorial page of the Journal, which is known for its conservatism.
In 2003, before the Iraq war began, the New York Post, then run by Murdoch's son, Lachlan, ran a front-page picture of U.N. delegates preparing to hear new evidence of the threat of Saddam Hussein's weapons of mass destruction. The paper labeled the French, who argued against the U.S. case for invasion, as "weasels" and altered the photo by replacing the heads of the French delegates with the heads of actual weasels.
The audacious News Corp. bid came two weeks ago in a letter to the Dow Jones board, the company said in a statement yesterday. Like The Washington Post Co. and the New York Times Co., Dow Jones has a dual-class ownership structure. This allows the Bancroft family, descendants of Clarence W. Barron, founder of the modern Journal, to control the company while holding a minority of the stock.
In addition to the Journal, Dow Jones owns Barron's financial weekly and the Dow Jones wire services. The combination would give Fox's new business TV channel unrivaled access to what many consider the best and most comprehensive financial coverage in the United States.
News Corp. has said it plans to launch the channel in the fourth quarter. The channel already is guaranteed to reach more than 30 million cable homes, has signed up top cable companies Comcast and Time Warner to carry the channel, and is hiring reporters and news anchors, according to sources close to the situation who spoke on the condition of anonymity because the process is ongoing.
The Journal has "great journalists; it's got great management," Murdoch said. "But it's got rather a confined capital; it needs to be part of a bigger organization to be taken further."
Murdoch noted that "the great thing and the value of financial journalism and high-quality journalism is that you can charge for it," noting that the Journal charges for its online content.
The early Wall Street money is on Murdoch, despite the Bancrofts' initial resistance.
"We think the family is more likely than not to accept," wrote Deutsche Bank analyst Paul Ginocchio, who put Murdoch's chance of acquiring Dow Jones at 75 percent.
In the United States, News Corp. owns the Fox television network and several stations, including Washington's WTTG (Channel 5); the Fox News Channel; the 20th Century Fox movie studio; and book publisher HarperCollins. Worldwide, the company owns the British Sky Broadcasting satellite television network; several newspapers in Australia, Asia and Britain; magazines; and other television assets.
Despite its journalistic prestige, Dow Jones is tiny compared with News Corp. Murdoch's empire is valued at $70 billion, and the company reported more than $5 billion cash on hand at the end of 2006. Even with its stock surge yesterday, Dow Jones is valued at only $4.3 billion. Which means Murdoch could write a check for Dow Jones.
News Corp. stock fell $1.09 yesterday, to $22.99 a share.
The news of Murdoch's bid was broken by CNBC yesterday and confirmed shortly after by Dow Jones.