Murdoch Seen to Win Control of Dow Jones

July 31, 2007

Murdoch Seen to Win Control of Dow Jones

Rupert Murdoch appeared today to have gained enough support from the deeply divided Bancroft family to buy Dow Jones & Company, publisher of The Wall Street Journal, for $5 billion.

Family members and trusts representing about 32 percent of the shareholder vote indicated they would support Mr. Murdoch’s offer, though several details were still being worked out, according to people briefed on the matter.

But a family spokesman issued a statement cautioning that the canvass of family members and trusts was still under way, adding, “Any suggestion that the process has been completed and/or that a particular level of support has been established is at this point premature.”

For Mr. Murdoch, the prospect of acquiring The Journal represents the pinnacle of his long career building the News Corporation into a $28 billion global media empire that already includes more than 100 newspapers around the world, satellite broadcast operations, the Fox television network, the online social networking site MySpace and many other properties.

It also signals the end of an era for Dow Jones and the controlling Bancroft family, an intensely private clan that had allowed The Journal to operate independently and become one of the nation’s most prominent and trusted newspapers, even as its finances deteriorated.

The three dozen members of the Bancroft family had engaged in an intense debate about The Journal’s future. Some argued vociferously that Mr. Murdoch would damage the newspaper’s credibility, while others said that his offer was too good to pass up at a time when the newspaper industry has been struggling.

At $60 a share, News Corporation is paying a heavy premium for a stock that traded around $36 before the offer became public on May 1.

The acquisition of The Journal, along with the planned introduction of the Fox business news channel by the News Corporation in October, makes Mr. Murdoch the most formidable figure in business news in the country.

The deal follows the recent sales of the Tribune and Knight Ridder chains. For The Journal’s competitors and the rest of the industry, it again raises the question of whether newspapers can exist independent of giant media conglomerates as advertising dollars migrate to the Web and readers have access to vast new sources of online information.

As if to mirror to anxiety of the entire newspaper industry, the Bancrofts finally voted on the bid after months of internal debate and shifting alliances within the family, which has controlled Dow Jones for more than a century.

The outcome remained in doubt until the final days, with family members and trustees who control their stock jockeying for position and switching sides, shifting millions of shares from one side of the vote to another.

To the last, people inside and outside Dow Jones who opposed the sale to the News Corporation were trying to arrange alternative deals that would allow some family Bancroft family members to sell and others to keep control of the company.

Brad Greenspan, an Internet entrepreneur, said that in the last few days, he had arranged conversations between one of his tentative backers for such a bid, Intel Capital, and Leslie Hill, a family member who sits on the Dow Jones board.

The Bancroft family, which has owned Dow Jones since 1902, holds 64 percent of the shareholder vote, most of it in a complex series of dozens of trusts with some three dozen beneficiaries. But the bulk of the voting power rests with a handful of members of family’s oldest generation who are the primary trustees, and with family lawyers who are also trustees.

Advisers to News Corporation said it needed family members representing at least 30 to 34 percent of the total shareholder vote to commit to the deal before proceeding with it, assured of topping 50 percent in an actual ballot.

The Ottaway family, with 7 percent of the vote, was solidly opposed to the sale. That left 29 percent of the vote in other hands, expected to be overwhelmingly in favor, but it is hard to estimate what fraction of those shareholders would have voted no, and how many simply have not voted. The deal requires more than half the total votes outstanding.

For Mr. Murdoch, the Dow Jones takeover gives him not only one of the world’s great media trophy properties and a larger voice in national affairs, but also a ready source of material and credibility for his newest big gamble, the Fox Business Channel he plans to begin in October.

Under a deal with CNBC, that channel has the exclusive right to use Dow Jones content and have Dow Jones reporters and editors appear on its programs until 2012. But Mr. Murdoch, whose new channel would compete with CNBC, has long been known for taking the long view, willing to wait years for his investments to pay off.

Dow Jones’s centerpiece is The Journal, with domestic circulation of more than 2 million six days a week, second only to USA Today, but the company also includes many other parts, like the financial weekly Barron’s, Dow Jones Newswires, the Web site MarketWatch and Factiva, an electronic news archive and information service.

Analysts predict that News Corporation would sell some or all of Dow Jones’s 23 small daily and weekly newspapers, most of them in New England and upstate New York.

Mr. Murdoch first made his offer to Dow Jones’s chief executive, Richard F. Zannino, over breakfast on March 29, and made a formal, written bid to the board on April 17, but the news did not break until May 1.

On May 2, Mr. Zannino made a presentation to the Dow Jones board that made it seem to many of them that the company’s prospects on its own were poor and that he favored a sale. He later insisted that he had not meant to give those impressions, but even so, the presentation had a sobering effect, and most of the board clearly thought that Mr. Murdoch’s $60-a-share offer was simply too good to pass up.

That breakfast with Mr. Murdoch set in motion a four-month struggle within the Bancroft family. Factions formed and dissolved, and momentum swung widely as family members changed sides, children were pitted against parents and, in some cases, siblings opposed one another.

For a private, reserved clan that had long frowned on confrontation or aggressive involvement in the company’s affairs, it was a long, uncomfortable conflict, played out with the news media trying to dissect their personalities and rivalries. And for much of that time, shareholders and executives at both companies could do little but watch and wait as the family labored to reach a conclusion.

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