News Corp. Takeover of Dow Jones Appears More Likely
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RAY SUAREZ: Three-plus months after his initial bid, today Rupert Murdoch and his News Corporation apparently won the prize he’s long coveted: the world’s marquee financial news organization, Dow Jones, and its crown jewel, the Wall Street Journal.
His $5 billion takeover offer, or $60 a share, was reportedly accepted by enough members of the Bancroft family, which has controlled Dow Jones for over a century, to guarantee the company’s sale. Murdoch’s offer was a 67 percent premium over Dow Jones’ pre-offer market value.
The Wall Street Journal has the second-largest newspaper 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.
Joining me now to discuss the details of the deal is Andrew Leckey, director of the Donald W. Reynolds National Center for Business Journalism at Arizona State University. He’s also a longtime syndicated investment columnist for the Chicago Tribune.
And, Andrew, when News Corp. first made this offer just over three months ago, it wasn’t met with universal applause. What did Rupert Murdoch and his associates do in the intervening 12 or 13 weeks to win over enough buyers to apparently make a deal?
ANDREW LECKEY, Arizona State University: Mr. Murdoch did something very important. He played it cool. He sat back and let the family members and the shareholders think about all that money. In addition, there was no white knight in the wings, so he stuck with his very generous offer.
But in the meantime, he also said the right things. Now, there’s been some discussion about how he may have handled other properties, but he said he would not tamper with the editorial content. And generally all the things he said indicated at least that he was not going to shock anyone.
Now, we all know who owns the company we work for, and we all know the people look closely at a product, but at least he did say the right things.
A turning point
RAY SUAREZ: When the deal was first announced, a lot of leaks came out of the Bancroft family. And what exactly were they arguing about? Were they arguing about the money, the Murdoch, or a little of both?
ANDREW LECKEY: In every family-owned business -- and it is particularly played out in America's newspapers -- there are usually three groupings you can be in, either those who are involved in the deal who've been involved and think it's a good idea, those who are totally against it because it is the family's heritage, and then the third group that says, couldn't we get even a little more money?
And these are the three groups that Mr. Murdoch knew would start to deal with each other. I mean, Mr. Murdoch even has dissension in his own family. He knows how that works, and he sat back and watched how it happened.
RAY SUAREZ: Was there a turning point? Was there a key relative or key controller of a certain bloc of stocks that turned the corner and brought them home free?
ANDREW LECKEY: Yes, indeed. A trust that is overseen by an attorney in Denver was the last one to hold out. It was holding out for more money and didn't get it, but a very important aspect is that Dow Jones agreed to pay something like $30 million in legal fees to the Bancroft family, so he wanted more than 32 percent of the voting shares of the family. He's going to wind up with about 38 percent anyway.
He didn't want it to be too acrimonious; he wanted to show that there were a lot of people backing him up. And when that final timber toppled, he had it all.
Possible changes over time
RAY SUAREZ: Well, why was 32 percent of all numbers the whisper number that was the clinching amount that Murdoch felt he had to get in family support?
ANDREW LECKEY: Well, first of all, you know that the public shareholders are concerned about the newspaper industry, and they were likely to vote in favor of the deal, because it is quite a lucrative offer. Now, the family owns about 64 percent of the voting shares. He wanted to have at least that amount to show that he had a large portion behind him.
And also, if you have too much dissension, it can drag on with legal fighting and back-and-forth about a lot of different things. Understanding he's dealing with a long-owning family, he wanted as clean a deal as he could possibly have.
RAY SUAREZ: Now, you mentioned earlier that certain assurances had to be made to family shareholders about editorial control, about the integrity of the paper and its history and so on. Are those kinds of deals, when they're made in a situation like this, enforceable after the deal is consummated?
ANDREW LECKEY: Well, there will be a five-member editorial oversight board to look over this, but that board will change over time, just as the Journal will change over time. Everything that happens will appear to be a Murdoch change.
For example, in the last year, the Canadian bureaus were closed at the Wall Street Journal. If that happened next year, everyone would say, "See? That's a Murdoch move." The Journal's content will be judged day by day and year by year; it will be watched very closely. And, of course, we tend to read into every publication who we know owns it.
RAY SUAREZ: Now, as we mentioned earlier, Dow Jones, a very large company with a lot of different moving parts. And, of course, so is Rupert Murdoch's News Corp. What does News Corp. get if this deal goes through that enhances what it already has or fits into what it already has?
ANDREW LECKEY: Well, the Journal is its people, high-quality journalists working every day to get the very best. It is the publication people look to for financial news. It's a homerun for Rupert Murdoch and News Corp., and that's because he was willing to pay more because he could do more with it.
For example, the Wall Street Journal has a Europe and an Asian edition. They're not very big. There's an opportunity to expand there. The discussion about him now offering a financial news channel, if that has the Wall Street Journal name on it, it's that much stronger. And, of course, the online product.
The benefit of the Bancroft family was that they kept out of the editorial product, but the criticism is that, therefore, the Wall Street Journal did not expand into lucrative areas. The existence of Bloomberg News, of MarketWatch, that the Wall Street Journal eventually bought, and all the other news sources, CNBC, might not have existed if the family and the newspaper had been more inventive in looking toward the future.
Pulling out of alliances
RAY SUAREZ: You mentioned CNBC. That's just one of the news organizations that Dow Jones already has an alliance or a partnership with. Will a News Corp.-owned Dow Jones have to start pulling the Dow Jones properties out of those alliances over time?
ANDREW LECKEY: They'll definitely be working on it. We've seen that Mr. Murdoch has very good attorneys, and they're worldwide attorneys. There shouldn't be any problem in terms of any regulatory approval of this, because Mr. Murdoch owns properties all over the world and is not concentrated in any one area. It is likely there may be smaller properties, either of News Corp. or of Dow Jones, that may have to be sold off, but there doesn't seem to be a big issue with that.
Disengaging from other those relationships is tougher. Nobody wants to be in an agreement with somebody that you know will be competing against you in a relatively short period of time. Usually money passes hands, and there are agreements made in these sort of areas. You sometimes do see the agreements take a while to actually transfer to the new hands, but I don't think that's going to be a major sticking point.
RAY SUAREZ: Andrew Leckey of Arizona State University, thanks for joining us.
ANDREW LECKEY: My pleasure. Thank you, Ray.
JIM LEHRER: Andrew Leckey, along with Arlene Morgan of Columbia University School of Journalism, will answer questions about the Dow Jones story in a forum on our Web site. To participate, just go to PBS.org.