One thing that’s become very clear in the past couple weeks is that a lot of people at Dow Jones don’t trust Rupert Murdoch to preserve the Wall Street Journal’s “journalistic integrity.” Everyone from Pulitzer Prize winners at the Journal, to Journal union representatives, to the Ottaways, to the Bancrofts seem to fear that Murdoch will damage the newspaper. On the face of it, this is rather odd. It almost requires us to accept that the various foes of News Corp’s offer for Dow Jones believe that Murdoch is some kind of monster who wants to acquire Dow Jones in order to destroy it.
It’s very unlikely that Murdoch wants to destroy the journal. And it’s also unlikely that the opposition is motivated by such nonsense. So what’s going on? Well, with a bit of work, we can see that the opposition is not so strange, and we don’t have to believe that his opponents are demonologists. There’s good reason for the friends of the Wall Street Journal to oppose him. They just haven’t done such a good job of spelling it out so far.
Mostly, Murdoch’s foes have pointed to examples which they claim demonstrate his interference with the way News Corp’s properties cover the news. But this evidence is easily countered with examples where Murdoch hasn’t. Indeed, some have said that Murdoch meddles with his low-brow tabloids but leaves the more prestigious titles alone.
“The way I see it, where editorial independence is valuable, Murdoch values it. Where it isn’t, he doesn’t,” Felix Salmon of Portfolio’s Market Movers blog has written.
And we can thank Salmon for helping us narrow the question of why News Corp’s offer is generating so much opposition—because people don’t trust that the values editorial independence enough to leave the Journal alone. But this brings us back to the question: why don’t they trust him. And to really get to the question, it helps to think of it in terms of Blaise Pascal’s famous wager.
Dow Jones
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Bancroft
The Dow of Murdoch: Why The Wall Street Journal Should Probably Trust Rupert Murdoch (And Why They Shouldn’t)
By John CarneyA group of Pulitzer Prize winning journalists at the Wall Street Journal have written a letter to members and a representative of the family that controls the newspaper’s parent company, Dow Jones & Co, opposing a proposed acquisition by News Corp, Greg Sargent reports on Talking Points Memo. The letter is signed by a team of reporters based in China whose coverage won a Pulitzer this year.
“We are correspondents who report from China for The Wall Street Journal, and we are writing to urge you to stand by the Bancroft family’s courageous and principled decision to reject News Corp.’s offer to acquire Dow Jones & Co,” the letter signed by seven journalists begins.
The letter, dated May 10th, accuses News Corp chairman Rupert Murdoch of allowing business interests to interfere with the journalistic integrity of news organizations owned by the company.
“News Corp. Chairman Rupert Murdoch has a well-documented history of making editorial decisions in order to advance his business interests in China and, indeed, of sacrificing journalistic integrity to satisfy personal or political aims,” the reporters write.
DealBreaker reported last week that Pulitzer prize winners at the Journal were being urged by opponents of the deal within the paper to write letters supporting the initial rejection of News Corp’s offer by the Bancroft family. It is not clear if this letter came as a response to that effort.
The Bancroft family controls Dow Jones through its ownership of most of the company’s super-voting Class B shares, which wield ten times the voting power of shares of common stock. Family members Leslie Hill, Elizabeth Steele and Christopher Bancroft received the letter, as did trustee Michael Elefante, who represents the family trust which controls much of the family’s shares. All four sit on the board of directors of Dow Jones.
Members of the Bancroft family also received a letter yesterday from Murdoch, dated May 11th, denying that he would interfere with the journalistic integrity of Journal.
“The businesses of Dow Jones, and in particular The Wall Street Journal, represent American journalism at its best. Your record of journalistic independence and integrity is second to none. Any interference — or even hint of interference — would break the trust that exists between the paper and its readers, something I am unwilling to countenance. Apart from breaching the public’s trust, it would simply be bad business,” Murdoch wrote.
The editor of the Times of London also authored a letter denying that Murdoch had interfered with the China reporting or editorial policy of his paper.
Wall Street Journal’s Pulitzer Prize-Winning China Reporters Write Letter Blasting Murdoch Takeover Bid [Talking Points Memo]
It’s letter writing mania! Not only did News Corp boss Rupert Murdoch write a letter Friday to the family which controls Dow Jones. His man at the Times of London, Robert Thomson, wrote to Journal shareholder James H. Ottaway Jr. defending his paper and himself against what he describes as “a challenge to the integrity of the journalists at The Times and to me personally,” the Wall Street Journal reports.
Last week Ottaway—whose family controls around 5% of the voting power of Dow Jones—wrote an op-ed in the Washington Post opposing Murdoch’s bid. Ottaway claimed the journalistic integrity of the Wall Street Journal and other Dow Jones publications “would be damaged if Rupert Murdoch takes over Dow Jones.”
What really seems to stick in Thomson’s craw is Ottaway’s accusation’s about News Corp’s business interests in China and the way it might affect the coverage of China in News Corp owned newspapers. “There is a clear conflict between his business interest in News Corp.’s Star TV broadcasts into the huge China market, where he has had to kowtow to government censorship, and the sharp criticism of Chinese violations of human rights, religious liberty and free speech that the Journal’s editorial page has published. I doubt that freedom to criticize the Chinese government would continue under Murdoch’s ownership,” Ottaway wrote.
Thomson, who is the top editor of the Times (which is owned by News Corp), defends his paper against the charge that it panders to China. “As a Beijing correspondent, I was in Tiananmen Square on the night of the massacre in 1989 and was thrown out of Tibet by heavy-handed Chinese officials, so the explicit allegation that we are pandering to the Communist Party came as rather a surprise,” he writes. Attached to the letter is a selection of editorials—leaders in Brit-journo speak—on China, which take a tough line with the Communist Party still running the country. The editorials, which date from May 2005 to January 2007, scold China’s leaders for arresting a journalist, internet censorship, “pervasive” corruption and developing space-based military weapons.
So who are these Ottaway characters who dare doubt the integrity of British journalists on the issue of China? Haven’t they even heard of the Opium War? Don’t they know that no-one can hate China like a Brit? After the jump, some background on how the Ottaways went from working at the Detroit Free Press to being Dow Jones second family.
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Bancroft
The Dow of Murdoch: Rupert Murdoch Brings The Bancroft Family Together
By John CarneyThe family that controls 64% of the voting power of Dow Jones & Co is reportedly meeting right now to discuss News Corp’s bid for the company. David Faber of CNBC reported just a short while ago that the Bancroft family, which controls Dow Jones through its super-voting shares, was holding a conference call “right now” to discuss the bid. This may be a sign that the family is re-considering its rejection of the News Corp offer.
Today Bancroft family members received a letter from Rupert Murdoch stating that he regrets the details of the offer had become public and promising to establish an “independent, autonomous editorial board” to oversee the paper. In the letter, Murdoch describes himself as a “first and foremost…newspaper man,” praises the Wall Street Journal’s “journalistic independence and integrity” and says his is “unwilling to contemplate” any interference with the paper’s integrity. He writes that he would like to appoint a member of the Bancroft family to the board of Dow Jones.
“This letter may give the Bancroft’s a way to accept Murdoch gold , if that’s what they’re looking for,” an investment banker familiar with the deal told DealBreaker. “They’re haven’t been any other bidders, which must put pressure on them to accept this offer.”
Murdoch probably hopes that this is exactly what effect his letter will have. He’s steadfastly refused to offer more money than his original offer. Last week, CNBC’s Charlie Gasparino reported that he had been advised not to offer more by his bankers at JP Morgan had told him not to increase the bid. As we explained on Friday, Murdoch’s strategy to win over the Bancroft’s now appears to rely on charm and promises to not ruin the paper.
Murdoch also promises to make efforts to keep the team of “journalists, editors, management” of the Journal and other Dow Jones properties, expand the Journal in Europe and Asia and improve the Journal’s New York headquarters.
Text of Murdoch Letter to Bancrofts [Wall Street Journal]
News Corp & DJ Update [CNBC.com]
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Bancroft
The Dow of Murdoch: Is Rupert Losing Confidence? Or Is This Just A Deal Tactic?
By John CarneyThe story at the end of week two of News Corp’s bid for Dow Jones is clearly the loss of confidence that this will end in an acquisition. No other bidders have emerged. News Corp hasn’t made any gestures that it might increase it’s bid. Quite the opposite—word is spreading that News Corp won’t increase it’s bid and that News Corp CEO Rupert Murdoch has told a close associate that he is not certain he will prevail.
Murdoch seems to be trying to use charm rather than money to win over the Bancroft family, which controls the company through its super-voting shares and has announced—through a representative on the Dow Jones board—that it isn’t going to take News Corp’s offer. He’s telling jokes. Keeping it light. On the News Corp earnings call he spoke of his admiration for the Bancroft family and Dow Jones management. And he’s more or less apologized for the fact that his offer became public, claiming he hoped to negotiate the deal in private—contrary to rumors that the leak came from News Corp. The point of this is to make nice with the Bancrofts, to take away the impression that Murdoch went public with his offer in an attempt to get the public shareholders to pressure the family into selling the company. No one likes to be strong-armed.
(After the jump: A completely paranoid deal judo conspiracy theory.)
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Dow Jones
Murdoch Refuses To Take Hint, Lays It On Thick (But Not Too Thick) With Bancrofts
By Bess LevinAlthough they’ve continued to rebuff his advances and requests for a meeting, Rupert Murdoch noted yesterday that he and News Corp “admire the Bancroft family and the Dow Jones management. It’s a great collection of assets including a great newspaper.” Of course, he went on to flatter himself as well, offering that “if we did not have strong confidence in our own business as well as in what could be created by combining News Corporation and Dow Jones, we would not have made the generous offer we did,” because, as he well knows, confidence is a major turn on.
Bloomberg notes that shares of Dow Jones had the biggest drop off in more than four years, based on the concern that Murdoch won’t be increasing his offer. The stock fell 4.8% yesterday to $52.40 at 4 p.m yesterday.
Murdoch keeps up WSJ chase [The Guardian]
Murdoch Woos Bancrofts With Flattery, Not Higher Bid [Bloomberg]
Related: Separted at Birth?
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Business Media
Dow Jones Insider Trading Watch: Two Charges, Dow Jones Director Scutinized
By John Carney
That was fast! The Securities and Exchange Commission didn’t waste much time going after investors who bought shares of Dow Jones & Co in the weeks prior leading up to the public revelations that News Corp had offered to buy the company at a steep premium. Yesterday, the SEC filed a lawsuit against a Hong Kong couple, Kan King Wong and Charlotte Ka On Wong Leung, accusing them of insider trading. The couple had purchased $15 million of Dow Jones shares prior to the May 1st announcement.
“It was their first purchase of Dow Jones shares — and a profitable one,” the Wall Street Journal reports today. “After the unsolicited offer was disclosed May 1, Dow Jones shares rose more than 50%. Three days later, the couple had their broker sell their entire position in the stock for a profit of $8.2 million.”
The close timing of the purchases with the announcement make it highly unlikely that this was simply a case of lucky timing on the part of the Wongs. Adding to the suspicion that the couple had insider information is the risk they took on buying the $15 million of stock. Prior to the transactions, the Wongs reportedly had only $433,000 in their Merrill Lynch account available for purchasing equities. They borrowed money from Ms. Wong’s father and used margin loans to buy the stock. Another stock purchase was funded by a money transfer from an unknown person using a JP Morgan Chase account in Brussels. The stock purchases—the couple accumulated the stock over the course of a couple of weeks beginning April 13—were also a stark departure from the usual investment pattern of the Wongs. “The SEC said that prior to their Dow Jones stock purchases, the Wongs owned mostly fixed-income securities, as well as equities valued at $606,600,” the Journal writes.
The questions everyone is asking is: what did the Wongs know and how did they know it?
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