Rupert Murdoch deliberately priced his $5 billion offer for Dow Jones & Co. so high that others would find it tough to beat. On Thursday, two other potential bidders essentially proved his point by dropping out of the running.
General Electric Co. held preliminary talks with Pearson PLC, a London-based company that publishes the Financial Times newspaper, about possibly combining GE’s business news channel CNBC with the FT and Dow Jones.
But on Thursday, Pearson’s CEO Marjorie Scardino — who is from Texas — told the FT’s staff that while Pearson had “kicked around some ideas” about a three-way deal, “we didn’t see that combination stacking up for our shareholders.”
Murdoch’s offer of $60 a share for Dow Jones represents a massive premium of about 65 percent over the levels that Dow Jones shares had been trading prior to the offer becoming public in early May. Many on Wall Street believe the price is too high to be matched by other bidders.
News of the withdrawal by Pearson and GE sent Dow Jones shares down by nearly $1 Thursday, but they quickly recovered to the level they had been before the midday announcement from GE. In afternoon trading Dow Jones shares were off 58 cents at $60.07.
With GE and Pearson out, no other serious bidders are currently in sight for Dow Jones. Supermarket billionaire Ron Burkle has agreed to work with a union representing Dow Jones employees about finding a possible alternative to Murdoch, but so far nothing has emerged.
Murdoch, who built News Corp. into a major media conglomerate that spans the globe, has long wanted to own the Journal, a prestigious, prize-winning newspaper that carries tremendous clout in the business world.
Also, gaining control of Dow Jones would bolster Murdoch’s plan to launch a financial cable news channel that would compete with CNBC, which is a unit of GE’s NBC Universal subsidiary.
A union that represents Dow Jones employees and a former Dow Jones board member say they fear the Journal’s quality would suffer under Murdoch, however, and that he might bend the paper’s coverage to suit his business interests. Murdoch says those concerns are unjustified.
Murdoch owns a number of newspapers in the United Kingdom, his native Australia and the New York Post, as well as the Fox network, Fox News Channel and the online social hangout MySpace. Several of his papers such as The Times of London are highly regarded, but he is also known for owning racy tabloids such as The Sun in England.
The controlling shareholders of Dow Jones, the Bancroft family, initially rebuffed Murdoch’s offer but later agreed to meet with him to discuss their concerns about maintaining the editorial independence and integrity of The Wall Street Journal. With a combined 64 percent of Dow Jones’ shareholder vote, the Bancrofts can veto any proposed change in control.
Both sides said the initial meeting went well, but no subsequent meeting was set up and the Bancrofts were meant to deliver a set of proposals to News Corp. about editorial safeguards for the Journal.
Instead, Dow Jones’ board said Wednesday that it would take the lead in discussing “all aspects” of Murdoch’s bid, including maintaining the Journal’s independence. That could accelerate Dow Jones’ negotiations with News Corp.
The Bancroft family has controlled Dow Jones for more than a century. But unlike more tightly knit families that control other newspaper publishers, such as the Grahams of The Washington Post Co., the Sulzbergers of The New York Times Co. and the McClatchys of Sacramento, Calif.-based McClatchy Co., the Bancrofts have some three dozen adult members scattered across the country. Rifts have emerged among its members about the future of Dow Jones.
The Bancrofts maintain voting control of Dow Jones through a special class of stock, which is not publicly traded, while owning only about one-quarter of the company’s economic value.
Despite the prestige and influence of the Journal, Dow Jones has fallen behind rivals such as Reuters Group PLC, Thomson Corp. and Bloomberg LP in delivering real-time financial data and information to investors.
Just two days after the Bancrofts initially spurned Murdoch’s approach, news leaked out that Thomson was about to announce a combination with Reuters, which would create a powerful rival to Dow Jones in the financial news marketplace.
Despite its prestige and storied publishing history, Dow Jones is a relatively small company compared with media giants such as News Corp., with $507 million in revenues in the first quarter of the year, versus $7.5 billion in the same time period for News Corp., which uses a different fiscal calendar. News Corp.’s current cash stockpile of $7.3 billion easily exceeds the $5 billion is has offered for Dow Jones.