Dow Jones Board Sends Murdoch Deal to Bancrofts
Wednesday, July 18, 2007
Now it's up to 35 contentious relatives whether Rupert Murdoch gets control of the Wall Street Journal.
The Dow Jones & Co. board of directors last night said it would recommend that the company's family owners approve a sale to Murdoch's News Corp., the last barrier between the global media mogul and his coveted Journal.
The 35 members of the Bancroft family, descendants of the founder of the modern Journal, hold 64 percent of Dow Jones voting control and have four of the board's 16 seats. A majority of the Bancrofts' shares is required to approve the $5 billion sale to Murdoch.
The Dow Jones board "has determined that it would be prepared to approve, and recommend to the Dow Jones stockholders, including the Bancroft family stockholders, a merger agreement" under which News Corp. would buy Dow Jones for $60 a share in cash, the company said last night in a statement.
Dow Jones, like some media companies including The Washington Post Co., has two classes of stock. That gives the company access to public money while allowing a family to control the company through super-voting shares. In Dow Jones's case, the controlling stock is almost entirely held by the Bancrofts.
If the Bancrofts approve the sale to Murdoch, it would be a reversal of their initial position and a big public relations win for Murdoch. On May 2, one day after his bid became public, a majority of Bancrofts said they would block a sale, fearful that the colorful and controversial Murdoch would use the esteemed financial publication to further his business and political interests.
But Murdoch has wooed the family over the past several weeks, his case aided by the fact that no serious rival has emerged to challenge his unsolicited offer for the company -- which pays a substantial premium over the pre-bid value of the stock, which was trading in the mid-$30s.
It is unclear how many Bancrofts Murdoch has won over.
On May 2, 80 percent of the Bancrofts said they would vote against a sale to Murdoch.
In last night's statement, Dow Jones said News Corp. did not specify how many Bancrofts must approve the deal and said the votes must be delivered "promptly."
One Bancroft not won over is director Christopher Bancroft, who is said to strenuously oppose the sale and was attempting a last-ditch maneuver to block it over the weekend by trying to raise money to buy out his relatives and gain voting control, the Journal reported Monday. Also, former Dow Jones director Jim Ottaway Jr. has publicly opposed the merger. Yesterday, he said he will vote his 7 percent of controlling stock against Murdoch.
"If the Dow Jones directors approve sale of Dow Jones to News Corp, it will be a sad day for Dow Jones and its readers, and a bad day for accurate, fair and unbiased news reporting in American journalism," he wrote in an e-mail yesterday.
Executives from News Corp. and Dow Jones emerged from tough negotiations Monday 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. That 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.
Dow Jones executives 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" or a "kiss" to help placate the Bancrofts.
But Murdoch, 76, held fast at $60 per share on Monday, said a source close to the negotiations who spoke on condition of anonymity because the deal has not been closed. News Corp. agreed, however, to take on some "outstanding liabilities" of Dow Jones, including "underfunded staff-related items" that News Corp. will pick up, the source said.
Further, the two sides are in agreement on the makeup of the proposed editorial board that will oversee the Journal and approve the hiring of the paper's managing editor and editorial page editor. Murdoch had proposed and the Bancrofts insisted on such a board as a potential buffer between Murdoch and the news content of the Journal. Candidates for the board are being agreed upon now, the source said.
Dow Jones stock closed down 50 cents at $56.45 yesterday. News Corp. stock closed up 62 cents at $24.25.