Behind the Bancrofts' Shift at Dow Jones

When members of Dow Jones & Co.'s controlling Bancroft family gathered 10 days ago for a meeting at a Boston hotel, they expected a fight. Some wanted to entertain a $5 billion bid for the company by Rupert Murdoch's News Corp., but Michael Elefante, a powerful Dow Jones director and family trustee, had opposed it.

Instead of a rebuff, the family members got a huge surprise: Mr. Elefante had switched sides.

Mr. Elefante, a partner at a law firm that had represented the family for decades, told the group that for Dow Jones to remain competitive, he now believed the family needed to explore a sale to Mr. Murdoch or another bidder, according to people familiar with the presentation.

A look inside the family's deliberation shows four crucial factors laid the groundwork for the Bancrofts' dramatic change of position. One was the shift by Mr. Elefante, a Boston lawyer who oversees the family's trusts. A rift in the 34-member family widened as an increasingly noisy wing, especially those in the younger generation, agitated for Mr. Murdoch's offer to be considered. In a presentation to the board weeks earlier about the deal's pros and cons, Dow Jones Chief Executive Richard Zannino had starkly laid out to the family the downside of shutting the door. Finally, competition was getting fiercer than ever, with business-information providers Reuters Group PLC and Thomson Corp. announcing merger plans. All this made it harder for the family to resist the rich premium of Mr. Murdoch's offer.

On Thursday evening, the new stance surfaced at a special Dow Jones board meeting. The Bancroft family said in a statement that it wants to meet Mr. Murdoch to discuss his bid, and it will consider other bidders as well. (Read the statement.) The family, which controls 64% of Dow Jones's voting power, cautioned that a sale isn't a certainty. But it said the "mission of Dow Jones may be better accomplished in combination or collaboration with another organization, which may include News Corp."

On Friday, investors bid up shares of Dow Jones, which owns The Wall Street Journal, by nearly 15% to $61.20 in New York Stock Exchange 4 p.m. composite trading. That was above Mr. Murdoch's $60-a-share offer. In an interview Friday, Mr. Murdoch said, "Everybody thinks $60 is a terrific offer....We don't have any secret plans to pay more."

Representatives of the Bancroft family are planning to meet with Mr. Murdoch on Monday, according to people familiar with the matter.

The meeting is expected to deal solely with issues related to journalistic integrity, these people said. The family said Thursday that it would meet with Mr. Murdoch "to determine whether, in the context of the current or any modified News Corp. proposal, it will be possible to ensure the level of commitment to editorial independence, integrity and journalistic freedom that is the hallmark of Dow Jones."

M. Peter McPherson, nonexecutive chairman of the Dow Jones board and president of the National Association of State Universities and Land-Grant Colleges, will join the family in the meeting, these people said. Mr. Murdoch has sought to assuage concerns about his journalistic integrity and has offered to establish "an independent, autonomous editorial board" to protect the independence of Dow Jones's publications.

In the month since Mr. Murdoch's offer became public, the family has experienced conflict and turmoil. Family members have switched sides, sniped at each other in emails and fought about meetings. Two important family members didn't even attend the pivotal May 23 meeting where Mr. Elefante announced his change of heart.

In a lengthy email to family members sent Thursday, William Cox III, a longtime family dissident, complained that he had been excluded from decision making by his relatives -- and that they didn't have "the foggiest idea about what is going on."

Looming over all the discussion is the big premium Mr. Murdoch is offering for Dow Jones shares, which is 67% more than the company's stock price before the offer became public.

The Bancrofts have prized their role as protectors of the Journal's journalistic integrity for 105 years. A number of them distrust Mr. Murdoch's media conglomerate and have worried he would subordinate the Journal's independence to his own business and political interests.

In recent years, however, a slowdown in advertising has squeezed the newspaper business, and Dow Jones's stock price lagged. Mr. Murdoch and others contend that Dow Jones's generous dividend, on which Bancroft family members rely for income, hinders the company from investing in new initiatives.

The predicament has created a set of conflicts for the Bancrofts, including the pull of family pride against a duty to all shareholders and the split of older family members who hold more power and younger ones who have less.

In his email Thursday, Mr. Cox presented his case for why the company should be sold. "Murdoch is someone who knows the industry and sees the future," he wrote. Just two weeks ago, Mr. Cox's father, William Cox Jr., said publicly that Dow Jones would be "ruined" if it were sold to Mr. Murdoch.

Mr. Murdoch's representatives spent months laying the groundwork for an offer. In late September 2006, the younger Mr. Cox was approached in Rome, where he lives, by a Murdoch representative, people familiar with the situation say. During a meeting at an outside café, the Murdoch representative said News Corp. would be willing to bid just under $60 a share for Dow Jones, but that it would be several months before it could formally make the offer because of other ongoing transactions, these people say.

At the Bancroft family annual meeting in Boston in October, Mr. Cox told other family members and trustees of the offer, the people said. Some in the family didn't take the approach seriously because it wasn't formal. Mr. Murdoch confirmed Friday that the contacts had been made.

In the ensuing months, the Murdoch representatives continued their contact with family members, gauging sentiment and advising them that an offer would be coming soon, according to people familiar with the matter. Mr. Murdoch broached the idea to Mr. Zannino, the Dow Jones CEO, at a breakfast March 29.

Mr. Zannino passed word to the board. The company and the Bancrofts privately received Mr. Murdoch's offer in mid-April. Their first instinct was to explore it, but two members changed their minds, according to people familiar with the situation. That shifted the vote to a solid "No." The bid was made public May 1, and Dow Jones announced the same day that 52% of the company's voting power was opposed to considering a deal.

Almost immediately, some family members began to worry whether they had acted too hastily. Leslie Hill, a Dow Jones director, confided to family members and others that she didn't feel comfortable with her vote, according to people familiar with the matter. Ms. Hill, a retired American Airlines pilot, didn't return calls seeking comment.

However, it took time to reverse course, partly because the family lacks a leader. It primarily has relied on its advisers for guidance, in particular Mr. Elefante. The lawyer, who serves as a trustee, Dow Jones director and personal attorney for some Bancrofts, enjoys the confidence of some in the family.

Others say Mr. Elefante is conflicted in his multiple roles. As a Dow Jones director he is obligated to look after the interests of all shareholders; as a trustee he must protect the interests of the full Bancroft family; and as a personal lawyer he represents his clients' interests. A person close to Mr. Elefante says the interests of his various constituencies related to Dow Jones are almost always in alignment and he takes pains to avoid any conflicts.

The family also needed time to adjust to the relatively new chief executive, Mr. Zannino. He had risen to the job in February 2006 and impressed family members with his business judgment. But as a financial executive he differed in tone and style from the journalists who had previously run Dow Jones.

At a special board meeting on May 2, Mr. Zannino laid out the opportunities a News Corp. tie-up might present, such as better marketing and distribution of the Journal. He said that if the offer were turned down, directors might face pressure from holders of Class A Dow Jones shares, which have only one-tenth the voting power of the Class B shares mostly held by the Bancrofts and their trusts.

Mr. Zannino wanted Bancroft family members to understand that when they turned down $60 a share, "they were turning it down for a long time," says a person who saw the presentation.

Mr. Zannino, who has repeatedly said he isn't taking a position on the offer, also outlined the advantages of rebuffing Mr. Murdoch. He said that would protect Dow Jones's journalistic independence.

Later, some family members would say that Mr. Zannino's presentation helped plant the seeds of the idea that the status quo at Dow Jones was no longer acceptable. At the time, however, there was something of a backlash against the presentation. Several directors felt that the way Mr. Zannino lined up the pluses and minuses suggested he favored the deal, according to three people familiar with board discussions. If the CEO were taking a position, he would be thrusting himself into a decision that family members felt rightly belonged to themselves.

In a later discussion of the offer, two Dow Jones directors voiced concern about Mr. Zannino's presentation: Ms. Hill and Harvey Golub, chairman of Campbell Soup Co. and former American Express Co. chief. Mr. McPherson said he would relay the concerns to Mr. Zannino, according to a person familiar with the discussion.

After learning of the directors' impressions of his presentation, Mr. Zannino sent an email to the board, with an attached letter dated May 7. "I'm writing to follow up on my comments at last Wednesday's board meeting," he wrote. "My sole intention in making these comments was to summarize the pros and cons of selling or not selling Dow Jones."

Mr. Zannino stressed his commitment to the company, whether or not it remained a stand-alone entity. "As CEO, I'm totally committed to doing everything in my power to help Dow Jones's continued success," he wrote. He said he appreciated "the confidence of the Bancroft family in this great company."

On Friday, Mr. Zannino reiterated: "I have not advocated any position on the offer and am focused on running the business."

Soon Bancroft family members in favor of exploring a sale began to mobilize. Leading this group were a number of the Hill siblings. They are grandchildren of Jessie Bancroft Cox, the feisty matriarch of the clan who together with her sister had safeguarded Dow Jones's independence for decades.

In the initial vote taken by Mr. Elefante, the Hills' mother, Jane MacElree, had voted against opening negotiations. Family members say she was swayed by her older brother, the elder Mr. Cox, who worked as a Dow Jones employee for many years.

But many of her seven children believed she and others had acted rashly. While the family traditionally entrusted Dow Jones to "the professionals," the Hills had concluded that the family's passive stewardship was hurting the company's competitiveness.

They had also become frustrated with Mr. Elefante's initial position opposing the Murdoch bid and were skeptical about whether he was serving the family's best interests. After Mr. Murdoch's private approach, Mr. Elefante solicited opinions only from trustees of Bancroft family trusts that hold Dow Jones shares and from individual Bancrofts who directly own the super-voting Class B shares. Though Mr. Elefante wasn't compelled to ask all family members, some of those who didn't get advance word of the Murdoch offer were upset. That anger gave new currency to longstanding complaints that the trustees favored the older generation of Bancrofts.

In challenging Mr. Elefante, the Hills had two ready family allies: Elisabeth Goth Chelberg and the younger Mr. Cox. In the late 1990s, the pair drew the ire of the other family members by raising questions about management's strategy. They focused on the company's purchase of Telerate, a provider of market data. The deal ultimately led to losses of more than $1 billion for Dow Jones.

Back then, many relatives were bitter that the pair went public with their criticism. The two continued to have concerns about the company's future, and, like the Hills, they didn't believe the family should dismiss Mr. Murdoch's bid out of hand.

In a flurry of telephone calls and email messages, the Hills sought to win other cousins over to their camp. They argued that planned merger of Reuters and Thomson would threaten Dow Jones Newswires, which competes with the two companies in providing business information. They warned that the "status quo" wasn't tenable: Dow Jones, they believed, was simply too small and starved of cash.

On May 14, the Hills got new ammunition for their case: A personal letter from Mr. Murdoch, in which he repeated his promise to protect the Journal's editorial ideals, and asked for a meeting.

The next day, Hemenway & Barnes, Mr. Elefante's firm, organized a conference call with family members to discuss the letter and other recent developments. The call consisted mainly of a presentation by the family's bankers and lawyers. Once again, the challenges posed by the Reuters-Thomson tie-up were dissected as were the broader challenges faced by the newspaper industry. The bankers' arguments left many in the family doubting whether Dow Jones could survive as an independent company.

Some participants wanted to discuss how to proceed. But when one family member tried to solicit the family's opinion on the situation, he was cut off, according to two people on the call.

Frustrated that the advisers were stifling debate, the Hills and their allies began trying to set up a family meeting to discuss how to proceed, according to attendees.

Some of the older family members were opposed, preferring to let Hemenway & Barnes continue to manage the situation. Tensions rose when Christopher Bancroft, a Dow Jones board member who lives in Texas, said he wouldn't attend the meeting. The younger Mr. Cox blasted him in an email forwarded to entire family.

"You are representing the interests of the entire Bancroft family, outside shareholders and professional trustees," Mr. Cox wrote on May 21. "You not being present shows a total disregard for every group you represent in matters that confront all concerned." Mr. Bancroft retorted that "if there is a real need for my company I will be there."

Mr. Bancroft didn't attend the May 23 meeting. Neither did the elder Mr. Cox, who said he "could care less" what was discussed.

It turned out to be an important moment. The meeting convened shortly after 10 a.m. at the Bostonian, across the street from the offices of Hemenway & Barnes. Representatives of each of the family's three branches attended. Concerned about leaks, some participants suggested the family members sign nondisclosure agreements, and they did.

The Hill siblings were ready to confront Mr. Elefante. It soon became clear that would hardly be necessary.

The lawyer spoke for just five minutes at the beginning of the meeting. He said he had changed his position. He mentioned the Reuters-Thomson deal and said Dow Jones was in a tight situation competitively. It was time to explore a sale, he said, while adding that he didn't necessarily advocate it. Then he turned to the family and asked its views.

Ms. MacElree listened in silence, according to a person familiar with the matter. Another family member, Elizabeth Steele, who is also on the Dow Jones board, said her branch of the family had concluded it lacked the "appetite for risk" involved in having Dow Jones go it alone in such a competitive environment, this person says. But Ms. Steele didn't say whether she and her family were willing to push to explore alternatives.

There was some acrimony, even among those who were generally on the same side. Ms. Hill accused the younger Mr. Cox of leaking information about the family's deliberations -- a charge he denied, according to people familiar with the matter. On the whole, though, those present agreed that the family needed to push for some kind of action, these people says.

Afterward, family members filed outside the meeting room for a lunch of sandwiches and salad, updating each other on their children and lives, people present say. Then they reassembled in the meeting room, where Mr. Elefante said he and the other trustees would give due consideration to their view that it was time to change the status quo and get back to them, this person says.

Family advisers began drafting a news release that would summarize the family's new view. To outward appearances, the family was still solidly against accepting Mr. Murdoch's overture. In an interview with the Journal that appeared a day after the family's Boston meeting, Mr. Bancroft indicated his lack of interest in the News Corp. bid. "I'm open to any situation that benefits The Wall Street Journal and Dow Jones and its shareholders," he said. "At the moment, I don't see anything that would do that."

Some Bancrofts worried that his comments would scare off other potential suitors, something Mr. Bancroft hadn't intended. Even relatives who share his views said they were surprised that he said it publicly.

Early this past week, Mr. Elefante told Mr. McPherson he wanted arrange a telephone board meeting to update the board on the family's position. The Dow Jones board arranged to meet by phone at 5 p.m. Thursday. Mr. Elefante kept the details of the family's views a secret until less than an hour before it started.

He began by reading the family's news release. The company's directors peppered him with questions, trying to understand the implications of the statement, attendees say. Did the family intend to put the company in play?

Mr. Elefante did most of the talking for the family, attendees say. The three other family representatives on the Dow Jones board -- Mrs. Hill, Mrs. Steele and Mr. Bancroft -- said little.

Mr. McPherson suggested that the four directors representing the family drop off the call to allow the company's nonfamily directors to discuss the statement. Mr. Elefante suggested that if the remaining directors agreed, the family could stay on the line and join the discussion. After consulting with Richard I. Beattie, a lawyer at Simpson Thacher & Bartlett representing the board, Mr. McPherson went back on the call and told the family representatives they should drop off.

The remaining directors discussed what to do. Mr. Golub, the Campbell Soup chairman, suggested directors might not need to put out a release about "exploration of alternatives," a signal the company was for sale, attendees say.

Lewis Campbell, the chairman of the board's governance committee, retorted: "We have a knife to our throats," according to attendees. "We have no choice."

When the family members rejoined the call, Mr. McPherson informed them that the board had decided to release its own statement saying that the board would explore strategic options, attendees say.

Mr. Bancroft interjected. "Wait a minute," he said, according to attendees. "My family didn't understand that this meant we were for sale." Mr. Beattie, the board's lawyer, responded by saying that key parts of the family's statement, which he read aloud, strongly suggested that notion.

Mr. Bancroft then asked Mrs. Steele if she understood the implication of the family's statement, attendees say. She said she did. Ms. Hill also said she understood the implications, according to the attendees.

A participant asked Mr. Elefante if he could say where the family stood on the Murdoch offer, attendees say. Mr. Elefante responded only that there was "consensus" among family members in support of their statement, attendees say.

"Is it too late for us to withdraw our statement?" Mr. Bancroft asked. Mr. Beattie responded by saying he was logged onto the Internet and The Wall Street Journal had just posted the statement on its Web site. Minutes later, the statement was formally released.

A person close to the family expressed some displeasure with the board's statement, saying it went beyond what the family had hoped. "We were not asking the board to put the company on the block," this person said. Ultimately, he said, the family will make the decision.

Write to Matthew Karnitschnig at matthew.karnitschnig@wsj.com, Sarah Ellison at sarah.ellison@wsj.com, Susan Pulliam at susan.pulliam@wsj.com and Susan Warren at susan.warren@wsj.com
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