News Corp. Makes a $5 Billion Bid for Dow Jones

The News Corporation, owner of the Fox News Channel and The New York Post, has made an unsolicited $5 billion takeover bid for Dow Jones, publisher of The Wall Street Journal.

Dow Jones confirmed today that it had received the offer and said that the Bancroft family, which controls the company, was evaluating the bid. “There can be no assurance that this evaluation will lead to any transaction,” the company said in a written statement.

But some members of the Bancroft family were already mobilizing against the bid. Four hours after Dow Jones made its first statement, it issued a second communication saying that some family members and their trustees planned to vote “shares constituting slightly more than 50 percent of the outstanding voting power of Dow Jones” against the deal.

“Dow Jones said its board would factor this information into its evaluation,” the statement went on.

The offer came in the form of a letter to the Dow Jones board two weeks ago, a person close to the situation said.

News Corp. offered $60 a share in cash for all outstanding stock in Dow Jones — a whopping premium over the $36.33 closing price on Monday. After news of the offer was reported this morning on CNBC, shares of Dow Jones leaped 58 percent. Trading of the stock was briefly halted on the New York stock exchange as shares approached $58. At the end of the trading day, shares closed up 57 percent, at $56.90.

The news had a ripple effect across the media industry today. Shares of media companies rose broadly in trading today, with stock of Reuters, Gannett and The New York Times Company all posting unusually high gains.

The acquisition of Dow Jones would broaden the reach of News Corp, owned by Rupert Murdoch, into business reporting and American media in general. The Journal has the second biggest circulation of any American newspaper, more than two million, behind USA Today. In addition, Dow Jones owns a widely circulated newswire service, other business news outlets like Barron’s and the MarketWatch Web site. The company had $1.78 billion in revenue last year.

Mr. Murdoch already has ambitious plans to add business news reporting to the portfolio of News Corp. In February, News Corp. announced it was moving ahead with plans to start a business cable news channel. The channel, which is scheduled to start broadcasting late this year, will carry the Fox News name.

In a written statement confirming the offer today, News Corp. characterized the bid as “friendly” but said little else.

Mr. Murdoch has made his desires to own The Journal well known for years. And now that the News Corp. offer has come to light, other suitors for the paper could surface. But the Bancrofts have so far expressed no interest in selling the company, which the family has owned since 1902.

But as the years have passed, members of the Bancroft have been less engaged in the company’s management. Three Bancrofts serve on the Dow Jones board, but none work for the company.

Any sale of the company would require the family’s approval. In the mid-1980s, Dow Jones established Class B shares, with 10 times the voting power of the company’s common stock. Like similar stock structures at The New York Times Company and The Washington Post Company, the arrangement allows the family to retain control of the company.

It was initially unclear what prompted Mr. Murdoch to make his offer now. He has put out feelers in the past but determined that the Bancrofts were not interested in selling. This time, in offering such a large premium for the company, Mr. Murdoch may be trying to present the board with an offer it cannot resist. Like shares of other publishing companies, the stock of Dow Jones has slumped as readers and advertisers have migrated to the Internet, hampering the company’s ability to grow.

In recent years, Mr. Murdoch has focused his effort more on businesses like his Fox film and TV studios, the BSkyB satellite service in Britain and his MySpace Web business. Meanwhile, the entire newspaper industry has come under pressure — most recently leading to the break-up of Knight-Ridder Inc. and a proposal led by the financier Sam Zell to take the Tribune Company private.

The bid for Dow Jones in part reflects Mr. Murdoch’s belief that combining the company’s print and online assets with a television outlet could prove immensely valuable and competitive.

Source : http://www.nytimes.com