Business Experts Analyze Murdoch’s Bid for Dow Jones
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JEFFREY BROWN: The latest potential shakeup in the newspaper world would be a big one: Rupert Murdoch’s News Corporation has made a $5 billion takeover offer for Dow Jones & Company, parent of the Wall Street Journal.
Murdoch offered $60 per share, a 67 percent premium on the company’s recent market value. Nevertheless, the family which has controlled Dow Jones for over a century, the Bancrofts, said it would oppose the deal.
The Wall Street Journal has the second-largest circulation in the U.S. and prints editions in Europe and Asia. It also has a successful Internet presence and is one of the few newspaper sites that charges users for its content. In addition to the Journal, Dow Jones also owns: Barron’s, a financial weekly; the Dow Jones Newswire; and the MarketWatch Web site.
The company would become part of Murdoch’s worldwide media empire, valued at some $70 billion. It includes the FOX television network, FOX News Channel, 20th Century FOX film studios, and the New York Post in the U.S., and newspapers and television networks abroad. Last year, News Corp. also bought the popular social networking Web site MySpace.
The offer comes at a critical time in the newspaper industry, as readers and advertisers have fled print for the Internet. The Journal has not been immune to the financial downturn and is only modestly profitable.
Murdoch spoke about the deal yesterday on FOX News, one of his marquee media properties.
RUPERT MURDOCH, CEO, News Corporation: This is the greatest newspaper in America, one of the greatest in the world. It has great journalists which deserve, I think, a much wider audience. We feel that, with online and offline, there’s a great deal to be done here. It’s got great journalists; it’s got great management. But it’s got rather a confined capital. It needs to be part of a bigger organization to be taken further.
JEFFREY BROWN: Murdoch hopes to do that later this year, with the launch of a business news channel that would integrate the Journal’s worldwide reach and resources to make the start-up network an immediate force in financial news.
Resistance to Murdoch's bid
JEFFREY BROWN: And with me to discuss this potential sale is: John Morton, an independent newspaper industry analyst and media consultant; and John Cassidy, a business journalist and staff writer at the New Yorker. He previously worked at two of Rupert Murdoch's publications, the London Sunday Times and the New York Post.
Well, John Cassidy, starting with you, why would Rupert Murdoch bid, and bid so high, at a time when newspapers, to most people, don't look like such a good bet?
JOHN CASSIDY, Staff Writer, The New Yorker: Well, Rupert often doesn't look at things the way other people do. And the Wall Street Journal is a newspaper that he's been keen to get hold of for at least 20 years. I used to work for one of Rupert's papers in London, the London Times, and even back then he used to say complimentary things about the Journal. So it's been pretty well known around the company that he'd love to get his hands on it.
JEFFREY BROWN: Why now? Anything happen in particular that provoked it?
JOHN CASSIDY: Well, Rupert's a legendary predator. He probably sees that the Journal is in a bit trouble. The long-term editor is coming up for retirement. Dow Jones has got a new chief executive. The stock price has been languishing. He probably thought if he, you know, went now, he might win. Also, he's getting old, you know, Rupert, he's 76. He can't wait forever. It's time to move.
JEFFREY BROWN: John Morton, this is one of the last family-owned newspaper companies around, but it's not a very well-known family. Tell us about it.
JOHN MORTON, Independent Newspaper Industry Analyst: Well, the Bancrofts, the family, which has owned it since 1902, has always been very protective of its ownership of the Wall Street Journal, in particular, but Dow Jones altogether.
But it's a family that has not ever sought the limelight. They haven't worked for the company. They pursued their own interests. They're scattered all over the country. There are about 35 of them. But it is a family that, so far, has been resolute in not wanting anybody, any outsider to have anything to do with Dow Jones or the Wall Street Journal.
JEFFREY BROWN: Now, they own about 25 percent of the shares, but 64 percent of the voting?
JOHN MORTON: Of the votes.
JEFFREY BROWN: Explain how that works.
JOHN MORTON: Well, like the New York Times Company and the Washington Post Company, Dow Jones has two classes of stocks, one that's traded, you know, in the market, and then there is super-voting stock, which has about 10 times the vote of the common stock. And the super-voting shares are owned by the family.
And so, whereas they only own a quarter of the company, they have, you know, about two-thirds of the votes. And, therefore, anything that happens to the company will be what the Bancroft family wants to happen to it.
A 'bogey figure'
JEFFREY BROWN: So if they say no, as they so far have, is that it? Does...
JOHN MORTON: Well, essentially, that's it, except one of the interesting things about their 64 or 65 percent of the vote is that the percentage of their shareholders that have resisted, want to resist this, is just a little bit over 50 percent. And so it's conceivable that, if somebody or Mr. Murdoch or somebody else comes in with an even higher price, it might chip away at enough of those that they would get down below 50 percent.
JEFFREY BROWN: Now, John Cassidy, we don't really know, I don't think, whether the family says no to Murdoch specifically or to any bidder at this point, but certainly Rupert Murdoch arouses a lot of passions, pro and con. Tell us about him. Why is he such a divisive figure?
JOHN CASSIDY: Well, Rupert's always been a bit of a bogey figure. I think he quite likes being a bogey figure to the liberal press, in particular. I mean, 20, 30 years ago, when he bought the London Times in London, there was a big uproar. Then, when he moved to New York and bought the New York Post and the Village Voice, there was another big uproar. Time magazine put him on the front as King Kong taking over Manhattan again.
He's always been seen as this sort of outlandish, conservative throwback to the press barons of the turn of the century, like Randolph Hearst and Pulitzer. And there's something in that, although he's not quite as conservative as some people make out.
JEFFREY BROWN: And he's also known for putting a strong personal imprint on his holdings and getting quite involved. You had experience with that.
JOHN CASSIDY: Well, Rupert's a press baron. He's not a normal media proprietor. He doesn't make any bones about it. If he owns the newspaper, he expects to have a say in it.
When I worked at the Post, he was listed on the masthead as the editor-in-chief. So it was pretty clear who was in charge. He wasn't there day to day, but, you know, he did ring up occasionally and ask about stories and give his views on x or y.
I don't think he'd necessarily do that at the Journal, though. You know, he acts differently with his different newspapers. For example, the London Times, the paper I used to work on, had a very strong editor in its own right who used to deal with Murdoch. And I, as a relatively senior journalist, never had anything to do with Murdoch when I worked for the Times.
Expanding media empire
JEFFREY BROWN: You have been watching him for many years, though. How does he see this media empire building? What is it that he wants to create?
JOHN CASSIDY: Well, you never know with Rupert. I don't think he has a master plan. He's the ultimate opportunist. You know, a few years ago, he was all about creating a great satellite company, so he bought DirecTV. And then he bought MySpace, the social networking company, which turned out to be a brilliant business deal, and similarly he's being hailed as a sort of new media visionary rather than a tired, old newspaper guy.
Now, here he is buying a newspaper again. He's a difficult man to predict.
JEFFREY BROWN: Mr. Morton, another concern here that was raised was you have one powerful media company buying another one, so immediately questions of monopoly, of anti-trust. What are the issues on the table now?
JOHN MORTON: Well, I don't think there are really any significant anti-trust issues, because the Wall Street Journal is a national publication. And even though it's published out of New York City, where Mr. Murdoch already owns a newspaper and a couple of television stations, it's not really a New York City newspaper. It's a national newspaper. And so I doubt whether that will be a big issue.
A bigger issue, though, will be -- the Wall Street Journal is supposed to cover, in particular, American business. And here we have the possibility of one of America's now big companies, News Corp., owning it. And it would -- you know, the same kinds of questions would arise if, for example, somebody like General Electric, which has been mentioned as a potential bidder, were to wind up owning the Wall Street Journal. Now, that would be anathema certainly to everybody at the Journal, and I suspect probably at an awful lot of the Bancroft family.
JEFFREY BROWN: The union, the employees at the Journal, did put out a statement against this bid.
JOHN MORTON: They did. And they said, from top to bottom, the employees are horrified at the prospect of the Wall Street Journal being taken over by Rupert Murdoch.
JEFFREY BROWN: Do you think it's particular to Rupert Murdoch?
JOHN MORTON: Well, I think it would be particular to a lot of other companies, too, like General Electric, but certainly it is particular to Mr. Murdoch, because, in journalism circles, you know, most serious journalists are not very fond of the way he runs newspapers. And, you know, I mean, it's just a fact of life.
Possibility of a bidding war
JEFFREY BROWN: What do you look for next? Do you think that this provoke -- could it provoke a bidding war? You mentioned one other name that's been circulated as a potential suitor.
JOHN MORTON: It could. And if the price got high enough -- and, by the way, I think Dow Jones is worth more than $5 billion. But if the price got high enough, it could peel away some of those Bancroft family members of the second and third generations that, you know, don't have as strong an allegiance into the company as some of the older ones do. It could peel some of those off to the point where, you know, there could wind up being a vote in favor of accepting an offer.
JEFFREY BROWN: Mr. Cassidy, what are you looking forward to? I mean, what happens next?
JOHN CASSIDY: Well, I imagine there will be a big row, as there usually when Murdoch is involved. But I don't think he'll be put off by that. As I said before, he's used to this sort of thing, and I'm sure he was expecting some animosity. Actually, I'm surprised that the animosity hasn't been more intense, so he may actually be encouraged.
JEFFREY BROWN: One thing that is coming -- we mentioned in our setup -- is this new business channel that he's putting forward. What's the thinking, the tie between that and this potential buy of the Wall Street Journal?
JOHN CASSIDY: Well, it's not clear. Obviously, the Wall Street Journal is probably the leading brand in business news. So whether he's thinking of branding it as the sort of FOX-Wall Street Journal news channel, I'm not sure.
He may be just using that argument to try and sell it to Wall Street, because Wall Street analysts don't like newspapers at the moment, and it looks like a very retrograde step for him to buy a newspaper, but if he can sell it as an electronic, digital media play, you know, that goes better with the analysts.
JEFFREY BROWN: All right. John Cassidy and John Morton, thanks very much.