Murdoch's Bold Bid for Dow Jones May Ultimately Succeed
Rupert Murdoch's plan for world media domination may have hit a speed bump, but that is unlikely to prevent Dow Jones & Co., owner of the Wall Street Journal, from changing hands, and it may end up in Murdoch's after all. Although the Bancroft family, which controls more than 50 percent of the stock of Dow Jones, last night rejected the unsolicited $5 billion offer from Murdoch's News Corp., analysts believe the bid could spark an auction for the century-old newspaper publisher and ultimately bring about its sale.
"The Bancroft family has control, but there can be a limit to their ability to say no," says Lawrence Haverty, an associate portfolio manager at Gamco Investors, which owns Dow Jones stock. "Dow Jones is a minnow in the shark pool, besieged on all sides by competitors who have vastly more resources than it does."
The Washington Post Co., Gannett Co., and Google, all of which have refused to comment on the deal, are among the companies analysts mention as possible suitors for Dow Jones. However, analysts are quick to point out that News Corp.'s bid, at $60 a share, or a premium of 65 percent over Dow Jones's stock price at the time of the offer, could be hard to beat. "News Corp.'s offer is at such a big premium that it could be difficult to come in on top of it," says Rick Edmonds, a newspaper industry analyst at the Poynter Institute in St. Petersburg, Fla.
The offer, which sent Dow Jones stock into orbit yesterday and boosted other media company shares as well, comes at a time when newspaper companies are struggling. Neither the recent sale of Knight Ridder nor Tribune Co. brought in the kind of premiums Murdoch is offering. The bid by News Corp., which owns the Fox Network, MySpace.com, Twentieth Century Fox, and the New York Post among many other properties, is higher than the company's stock price has been in the past five years.
Murdoch has long had his eye on Dow Jones, which in addition to the Journal owns the WSJ.com website, Dow Jones Newswires, and Barron's. The company currently generates 30 percent of its revenues online and is expected to increase that to 50 percent by 2009. So, while the Journal would be a trophy for the Australian media baron, much as is the Times of London, Dow Jones would also give him a big boost on the Internet and when he launches the Fox business channel later this year. Its main competitor will be CNBC, which has a partnership with Dow Jones through 2012 and broke the news of the News Corp. bid. "This is a classic Rupert move," says Haverty. "Big and bold. Not small."
Speaking on the Fox News Channel before the Bancroft family's rejection was made public, Murdoch, 76, said he hadn't heard back from the family directly and that he expected to meet with the Bancrofts in a few weeks. "There is plenty of time," he said in an interview. "We will take it calmly and hope that they take it calmly and will think about it."
The Bancrofts, who have controlled the company for more than 100 years, aren't front-line managers and have always preferred to stay out of the spotlight. "There's definitely a family attachment to the business," says Edmonds. "But does that outweigh a very attractive exit strategy? If this were a broadly held public company, it would be a slam-dunk."
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