Dow Jones, Murdoch Reach a Deal
Tuesday, July 17, 2007
Executives from Dow Jones have agreed to the major terms of a deal to sell the company to News Corp., a move that would give Rupert Murdoch long-sought control the Wall Street Journal, the nation's preeminent financial newspaper, according to a source familiar with the talks.
The Dow Jones board will meet as early as this afternoon to formally consider Murdoch's unsolicited $5 billion bid, made in April, said the source, who spoke on condition of anonymity because the talks are ongoing.
The two sides emerged from tough negotiations yesterday afternoon with the outlines of a deal to bring the Journal, Barron's financial weekly, Dow Jones Newswires and the Ottaway community papers into the News Corp. global empire, which includes the Fox television network, Twentieth Century Fox movie studios, satellite television networks in Europe and Asia, and numerous newspapers in Australia and England. News Corp., valued at just less than $70 billion, dwarfs Dow Jones, which had a market capitalization of less than $4 billion before Murdoch's bid became public on May 1.
The big hurdle in yesterday's meetings was price.
Dow Jones had pushed for Murdoch to raise his $60-per-share bid by $2 to $3 per share, an amount that had come to be known as a "tip" to help placate the Bancrofts, the family that controls Dow Jones. The majority of them instantly rejected Murdoch's bid when it became public.
But Murdoch, 76, held fast at $60 per share yesterday, the source said. News Corp. agreed, however, to take on some unspecified "outstanding liabilities" of Dow Jones, the source said.
Dow Jones had no comment.
Dow Jones is set to release its June advertising figures for the Wall Street Journal on Thursday. In May, the Journal's advertising revenue was down 3.4 percent, the company reported, and improved June numbers are not expected.
Negotiating for Dow Jones yesterday was chief executive Richard Zannino.
Murdoch's bid represents a significant premium on Dow Jones stock before his offer, when shares were trading in the mid-$30s. Dow Jones stock shot up to more than $60 per share after Murdoch's bid became public; it closed down 54 cents at $56.95 yesterday. Shares of News Corp. closed unchanged at $23.63 yesterday.
Despite holding only 24 percent of total Dow Jones stock, the Bancrofts -- 35 family members descended from the founder of the modern Wall Street Journal -- control 64 percent of company voting power, owing to Dow Jones's dual-class stock system.
The day after Murdoch's bid became public, nearly 30 members of the Bancroft family -- representing 51 percent of the company's voting power -- said they would oppose a sale to Murdoch.
But in the following weeks, Murdoch wooed the Bancrofts.. The Bancrofts have four seats on the 16-member Dow Jones board, and Murdoch has not won them all over. Director Christopher Bancroft is said to strenuously oppose the sale and tried was attempting to block it over the weekend by trying to raise money to buy out his relatives and gain voting control, the Journal reported yesterday.
Murdoch would like to spread the Journal's reporting expertise across his media platforms, including Fox Business Network, a cable television channel slated to launch in October.