The Bancroft family that holds a majority stake in Dow Jones, publisher of The Wall Street Journal, is opposing a $5 billion, all-cash offer from News Corp., the giant media company controlled by Rupert Murdoch.
Dow Jones Tuesday confirmed receiving News Corp.'s offer. But late in the day, Bancroft family trustee Michael Elefante indicated that more than 50 percent of the voting shares of Dow Jones would vote against the transaction.
News Corp. proposed the $60-a-share acquisition in a letter sent to the Dow Jones board two weeks ago, and to the Bancroft family, which controls the company through its ownership of roughly 62 percent of its voting stock. It is not a family that acts monolithically, given that the controlling voting stake is held by as many as 20 separate members of the Bancroft family.
Just before the stock market closed, with its shares up nearly 55 percent in Tuesday's trading, Dow Jones issued a statement that Elefante had informed the company's board of directors that the family will "vote shares constituting slightly more than 50 percent of the outstanding voting power" against the News Corp bid.
Dow Jones said its board would "factor this information into its evaluation."
Members of the company's union, the Independent Association of Publishers' Employees, also issued a statement opposing the deal.
"The staff, from top to bottom, opposes a Rupert Murdoch takeover of Dow Jones & Co.," the statement said. "The massive premium Mr. Murdoch is offering suggests only one recourse to make the acquisition profitable: gutting the enterprise and slashing the staff that make it the leading financial news organization."
Murdoch, the man who has built News Corp. into a media empire extending far beyond its initial roots in the newspaper business, has nonetheless carried with him a deep desire to own Dow Jones and its prized property, The Wall Street Journal.
Later this year, News Corp. is expected to begin a business news channel to compete with CNBC. The addition of Dow Jones would certainly help those efforts. CNBC currently has a partnership with Dow Jones that extends until 2012. (MSNBC.com is a joint venture of Microsoft and NBC Universal, which owns CNBC.)
"It's a brilliant move on many levels," said Mortimer Zuckerman, editor-in-chief of U.S. News & World Report and chairman and co-publisher of the New York Daily News, which competes head to head with News Corp.'s New York Post. "He’s starting a business channel, and he’ll be able to marry (Dow Jones) to the business channel. And he offered a price, recognizing what capital gains rates are now, that’s hugely attractive for a lot of members of the Bancroft family who have been unhappy with the way the stock has performed.”
The offer of $60 a share represents a huge premium for Dow Jones — a full 50 percent above the stock's 52-week high. It is only that kind of premium that would have given the family a reason to even consider selling, according to people familiar with News Corp.'s thinking.
It is not clear what News Corp. shareholders will think of the bid. Despite their uniform belief that Mr. Murdoch is a visionary, his shareholders have not always benefited from that vision, which has also been characterized as empire building. They might prefer he used the $5 billion to buy back more stock, something News Corp. has been doing aggressively.
Again, the key here is the Bancroft family, the dynamics of which are hard to discern. It is possible that some members will support a sale process — enough so that the board will authorize one, but not enough to assure that even if a deal is reached it will be able to pass a shareholder vote.
The Bancrofts have long cherished their role as controlling shareholders of the company bought by Clarence Barron in 1902. But there have also been cracks in their ranks regarding the operations of the company, which has not been a strong performer.
If Dow Jones is officially put up for sale, other bidders might include Bloomberg or even private equity firms. As CNBC reported last fall, with a value that probably exceeds $20 billion, Bloomberg easily has the financial muscle to borrow the funds necessary to make a bid for Dow Jones. It remains to be seen what other bidders might emerge for a trophy property that, if it is for sale, will not likely be available again.
Following CNBC's report on the News Corp. bid, a Bloomberg spokeswoman said Tuesday there was "no truth" to speculation that the company might be making a bid for Dow Jones.