Dow Jones Director Resigns Over Bid

Dow Jones & Co. director Dieter von Holtzbrinck quit yesterday to protest the board's recommendation that the company accept Rupert Murdoch's $5 billion purchase bid, saying he is worried that the media mogul will compromise the editorial integrity of Dow Jones's prized jewel, the Wall Street Journal.

The surprise and dramatic defection came as the Bancroft family -- 35 relatives who control 64 percent of Dow Jones voting stock and carry the fate of the deal in their hands -- were mulling the unsolicited offer from Murdoch's News Corp.

In a letter to the 15 remaining directors dated yesterday and sent from Stuttgart, Germany, von Holtzbrinck wrote: "Sorry that I couldn't support the recommendation which got board approval. . . . Listening to our lawyers, one has to vote for a deal which is in the best [financial] interest for the shareholders, except if one can prove that such deal bears risks for the company that overcompensate the financial profits.

"I cannot prove that my worries are right. I can only refer to News Corp. business practices in the past." Von Holtzbrinck wrote that he does not believe that a proposed editorial buffer between the Journal and Murdoch "can finally prevent Murdoch from doing what he wants to do, from acting his way."

Von Holtzbrinck, 65, has been a director since 2001. He is one of the heirs to a German publishing house and is the world's 840th-richest person, according to Forbes magazine, with a net worth of $1.1 billion.

Von Holtzbrinck's publishing empire owns a German daily business newspaper and was a co-owner of the Wall Street Journal Europe. He is said to be worried about having to compete against a Murdoch-owned Journal with enhanced resources from News Corp., said a source close to the situation who spoke on the condition of anonymity because the deal has not closed.

"The board has accepted his resignation with regret, and we wish him well," Chairman Peter McPherson said. The company did not say whether it would replace von Holtzbrinck or leave the seat vacant.

The Bancrofts have four seats on the Dow board, including one held by Michael B. Elefante, who will convene a meeting Monday in Boston of Bancroft family members and representatives of the more than 100 trusts that hold Dow Jones voting stock, according to another source close to the situation who spoke on the condition of anonymity.

After the meeting, the Bancrofts and others are expected to make their decision on Murdoch's offer "within several days," the source said.

A potential rival bid by supermarket billionaire Ronald Burkle and MySpace co-founder Brad Greenspan became moot when the Dow Jones board endorsed Murdoch's offer on Tuesday, the source said.

Also yesterday, the company filed its second-quarter earnings. Dow Jones reported profit of $21 million (25 cents a share) on $530 million in revenue for the period ending June 30, compared to profit of $29 million (34 cents) on $456 million in revenue for the same period of 2006. Dow Jones shares closed yesterday at 55.40, down 0.25, or 0.5 percent.

Excluding one-time charges largely related to Murdoch's bid, the company's second-quarter profit would have been $38 million (45 cents).

When Murdoch's bid became public May 1, Dow Jones stock -- which had been trading in the mid-$30s -- rocketed to more than $60 a share. For Dow Jones employees who are partly paid in stock -- including chief executive Richard Zannino -- the value of their options soared as well.

Under accounting rules, Dow Jones is required to charge the increased value of the stock awards against second-quarter income, taking an $18.2 million bite out of second-quarter profits on paper, the company reported.

The Journal showed a 7 percent decline in ad revenue for the quarter. Subscriptions to the online version of the Journal rose 24 percent to 983,000, attributed partly to a promotion that gives new online Journal customers a free subscription to the print version of the Journal when they sign up.