Bancrofts Warm to Murdoch's Offer
Wednesday, June 13, 2007
If Rupert Murdoch can assure the family owners of Dow Jones that he will not meddle in the news coverage of the Wall Street Journal, the family will tell the company's board of directors it can start negotiating a sale price with the media mogul, a source said yesterday.
A slim majority of the Bancroft family, which has controlling ownership of Dow Jones, which publishes the Journal, rejected Murdoch's $5 billion offer for the company about a month ago, one day after the offer was made public.
Since then, however, market conditions and Murdoch's own appeals have helped the sometimes-fractious family see the merits of the bid, according to a source close to the situation who spoke on condition of anonymity because the talks are ongoing.
As early as today, the 35-member, three-generation Bancroft family plans to send a proposal to Murdoch's News Corp. that outlines requirements for a buffer guaranteeing that the Pulitzer Prize-winning Journal could continue to conduct reporting that is sometimes critical of Murdoch's media empire and business interests, the source said. The plan to send a proposal was reported in yesterday's Wall Street Journal.
If Murdoch agrees to the terms of the proposal, the Bancrofts plan to tell the rest of the board that their concerns about editorial independence have been satisfied. The Bancrofts have four seats on the 16-member Dow Jones board and control 64 percent of the company's voting stock.
The Bancrofts would then give the rest of the board the chance to review the structure of the proposed editorial buffer and permission to begin formal negotiations with News Corp. for its purchase of Dow Jones, the source said. News Corp. had no immediate comment yesterday.
Murdoch installed an editorial buffer at the Times of London after he bought the paper in 1981. Some editors there, including Harold Evans, who wrote a book critical of Murdoch's ownership of the Times, said Murdoch did not honor the buffer. Murdoch has disputed that claim.
Although specifics of the Bancrofts' proposal were not available, the family has reviewed the Times' buffer and did not find it structurally flawed, the source said. Instead, the family has come to think that the aggrieved editors may not have taken full advantage of avenues of redress when editorial disputes arose with Murdoch, the source said.
Murdoch, 76, made his offer during an April breakfast meeting with Dow Jones chief executive Richard F. Zannino. The bid became public May 1, but it took one day for about 80 percent of the Bancrofts, representing 52 percent of Dow Jones votes, to reject the offer.
Shortly after, current and former Journal reporters and Dow Jones executives inveighed against Murdoch, warning that the tabloid-owning press baron would use the Journal's global reach to further his business interests and to mute its criticism of companies and governments he deals with.
Since then, two key rivals to Dow Jones's market-information business, Thomson Corp. and Reuters Group, agreed to merge, putting Dow Jones at a disadvantage. The Bancrofts also listened to analyses from Zannino and Merrill Lynch, which is advising the family, that concluded that Dow Jones would be in a stronger position after merging with a larger company, not necessarily News Corp., than remaining as a stand-alone firm.
Murdoch wrote two letters to the family and had one meeting with them, bringing along his son, James, and two of his top executives, which made the Bancrofts more willing to entertain Murdoch's bid, the source said.
On Monday, Dow Jones said advertising revenue at the Journal fell 3.4 percent in May as advertising volume dropped 7.3 percent. In particular, technology advertising, such as ads for computers and software, fell 31 percent. The ad decline is not likely to lead Murdoch to reduce or otherwise change his bid for Dow Jones, said a source familiar with Murdoch's thinking who spoke on condition of anonymity because the talks are ongoing.
Murdoch has offered $60 per share for Dow Jones, a price that is well more than the share price of $36 just before his bid became public. Dow Jones closed yesterday at $59.03, down $1.18 per share.