Dow Jones Rejects Murdoch's Offer

By Frank Ahrens
Washington Post Staff Writer
Thursday, May 3, 2007

The Dow Jones board of directors rebuffed Rupert Murdoch's $5 billion takeover bid last night.

That could result in Murdoch raising his offer, other suitors entering a bidding war or shareholder lawsuits against the board if it eventually turns down all proposals, analysts said.

Dow Jones, publisher of the Wall Street Journal, has a dual-class stock-ownership structure, enabling the Bancroft family to hold 25 percent of company stock yet control 64 percent of the votes.

Dow Jones director Michael B. Elefante, the Bancrofts' representative on the board, said family members holding 52 percent of the company's votes oppose Murdoch's bid. Any merger would require majority approval, so the board said last night it would take no action on Murdoch's offer, effectively tabling it. Implicit in Elefante's announcement was that Bancroft family members holding 12 percent of the shares are either in favor of or undecided on Murdoch's offer.

A spokesman for Murdoch's News Corp. said the takeover offer stands.

News Corp. owns the Fox television network and several stations, the Fox News Channel, 20th Century Fox movie studios, the New York Post tabloid newspaper and book publisher HarperCollins, as well as satellite-television and publishing print assets around the world.

Murdoch's cash offer of $60 a share sent Dow Jones's share price up nearly 65 percent Tuesday. It reached $58.47 before falling to close at $56.20. Dow Jones shares closed yesterday at $56.

The fact that Dow Jones's stock price remained high despite the initial Bancroft resistance indicates that Wall Street thinks the company is in play.

Analysts are speculating that the Bancrofts -- descendants of Clarence W. Barron, founder of the modern Journal -- will eventually be willing to sell and are hoping to push Murdoch's offer higher or elicit rival bids.

Corporate governance experts said that if the Dow Jones board refuses all suitors, it could be sued by shareholders for not exercising its fiduciary responsibility to maximize shareholder value. The stock has remained around $35 a share for the past two years after declining from more than $70 in 2000.

Murdoch has long coveted the prestigious Journal. Unlike any other newspaper, the Journal has managed to profit from charging for its online content while adding subscribers, even as most other newspapers have lost circulation.

© 2007 The Washington Post Company