The announcement last night that key Murdoch aide Robert J. Thomson, who had been charged with selecting the next top editor of The Wall Street Journal , had pulled a Dick Cheney and selected himself, will have many speculating about the future of the Journal.

But why speculate when the evidence is right on the front page of the Wall Street Journal? Today's front page shows that the worst fears of Journal watchers--turning the Journal into the New York Post or even the Sun--haven't come to pass. But there does seem to be a shift in focus. Newspapers communicate their image of what is important with their front pages. And the front page story is a prized win for reporters, conveying prestige among colleagues. A few months ago the news desk at the Journal was split between general news and business news, and business news seems to be losing some of its grip on the paper.

Take a look at what's on the Journal's front page. Today there are six stories. The top billing is giving to the story of Ted Kennedy's brain tumor. The two other above the fold stories are about the quake in China and the US military. Below the fold we have a story about doping scandals in the Olympics. Of these, only the military story--they plan to use more alternate fuels--has a solid business angle. The rest are general news stories. Murdoch, who is said to favor more general news more prominently placed in the Journal, must be pleased.

The "What's News" section continues to lead with business and finance news shorts. For now.

Rupert Murdoch almost seems to be living up to the worst fears many had when made his bid for Dow Jones. Almost.

He’s been “flexing his muscles” by calling Wall Street Journal reporters, according to the Los Angeles Times. At least three reporters have had calls for him.

So what has prompted Murdoch’s calls? Does he want more favorable coverage of China? More “fair and balanced” Fox New Channel style reporting? A five-star review for the Simpson’s Movie?

Not quite. It seems that what Murdoch has been doing is attempting to keep the reporting staff of the Journal intact. The three reporters he’s called were considering leaving the Journal and Murdoch has asked them to stay.

“Murdoch, who has been vacationing in the Mediterranean in recent days, made the calls to the reporters from his yacht, the Rosehearty, named for the Murdoch family's ancestral home in Scotland,” the LA Times reports.

Scandal upon scandal! He’s got a yacht! It’s in the Mediterranean. Where are the reporters’ yachts? Where is the Mediterranean for the reporters?

We’re not sure why this is anything but a positive story for the Journal, its editors, its reports and its readers. As we maintained from the beginning, Murdoch did not come to destroy the Journal but to own it. And now he’s personally reaching out to reporters in an attempt to keep it intact.

But there’s already a movement to make something scandalous of these moves. “Some journalists in the newsroom took the gesture as a sign of Murdoch's commitment to keep the staff's quality high. Others said it showed that Murdoch would take a hands-on approach in newsroom affairs despite a special committee established to keep him from interfering in coverage,” the LA Times reports.

Heaven forbid! The owner is trying to keep his top reporters! It’s a clear violation of the editorial integrity of the newspaper, which apparently now means letting the newsroom fall report.

So who are the put-upon reporters who got the call? The LA Times named them as Tara Parker-Pope, Kate Kelly and Henny Sender. The latter two are DealBreaker favorites, who have broken important stories in recent months. (Tara Parker-Pope is a Health writer.) We’re sure they’re in high demand, and it just seems demented to expect that Murdoch wouldn’t fight to keep them on board.

Our question: is this what they were talking about when they said Murdoch would "interfere" with the Journal? If so, bring it on!

Murdoch's presence felt at Journal [Los Angeles Times]

Providence Equity Partners bought a 10% stake in the NBC/NewsCorp 'YouTube ripoff' JV for $100 million, valuing the new entity at $1 billion. The JV still doesn't have a name, but is tentatively called "New Site." The wizards at Providence, NewsCorp or NBC can't find an analyst to staff on this one?

Rupert's been too busy deciding what to rename the Journal (we're banking on The Weekly Lessening Of Standards) to come up with anything groundbreaking. It seems like the JV could budget for a branding consultant or childlike empress within that startup capital somewhere.

Whatever happens, the real question is whether NewsCorp and NBC can get along, considering the track record of media JVs between competing companies with polarized ideologies. More, from the New York Times:

The sizable investment from Providence Equity Partners may not quell doubts that the two big media companies will get along. Ventures where decision-making is split between two parties with diverging agendas often struggle (even though NewsCorp takes two steps forward, NBC takes two steps back, they come together, 'cause opposites attract), and the News Corporation and NBC Universal doggedly compete on TV and in theaters. Roger McNamee, a partner at private equity firm Elevation Partners, said there were few examples in business history where joint ventures succeeded. “The simple question is, are they organizing for success?” he said.

The new site will have an impressive library of franchises including the Simpsons, SNL, 24, Heroes and Manimal. Now you can finally watch that impossible to access “Dick in a Box” video.

Equity Firm Invests in NBC Universal-News Corp. Online Venture [New York Times]

Off to a slow start here this morning because of the rain in New York City. We had to wait for our interwebs to dry out. (Just like Alphaville, the deal blog at Financial Times, which has reportedly had trouble due to the flooding in England. Unless that's just Brit-speak for, uhm, one too many pints on Sunday night.)

But it’s back to business now. And by “business” we mean, of course, the saga of Rupert Murdoch, the Bancroft family and the Wall Street Journal.

One of the things we’re sure has been absolutely frustrating to anyone who has been following the endless tape of this story has been the complete lack of information about which members of the Bancroft family and its representatives control exactly which shares and which percentage of the votes. It was only at the middle of last week that we learned that Michael Elefante, the partner at the Boston law firm Hemenway & Barnes who is a trustee for two of the largest trusts holding shares for the family, can deliver a little less than half of the family's 64% voting stake. Let’s call that 30% of the total voting power of the company.

Today the New York Times reports that the leader of the opposition to Murdoch within the family, Christopher Bancroft, controls around 14.5 percent of the total Dow Jones shareholder vote as of January. And his cousin, Jane Cox MacElree, is running around with 14.8 percent. (Apparently no-one else has more than 4.3%.) But you have to read a bit between the lines of the Times—too often the stuff we really want to know apparently isn’t “fit to print”—to understand why they spend so much time talking about Chris and so little talking about Jane. It’s because Jane isn’t really involved with the Dow Jones stuff, and leaves the decision making to Chris. So you can count her shares as shares controlled by Chris. That gives him around a little more than 30% of the voting power of the company, or about what Elephante controls. To that you can add the “Never Murdoch” shares controlled by the Ottaway family to come up with a 36% opposed number.

In short, going into today’s big Boston Bancroft powwow, Murdoch is a bit behind. Probably at least 36% of the voting power of Dow Jones opposes him. He’s got 30% on his side. But Murdoch has a secret weapon: the 30% or so of the voting power vesting in shares that were once held by the general public and are now held by stock arbitrageurs, the Bancrofts, the Ottaways and a few people who aren’t paying any attention. Most of those shares will vote his way. To play it safe, let’s put that pro-Murdoch number at around 25%.

Which gives Murdoch right around 55% of the voting power of the company. Since he only needs 51%, that means he wins. But it’s close. And since we’ve been guestimating at a few of the crucial numbers, it’s possible that it’s even closer than this. If the numbers are shifted a couple points in the only direction—say, Elefante only has around 28% of the vote in his pocket and only 22% votes held by common shareholders go for Murdoch, he’s down to a losing 50%.

Which leaves us at the exciting possibility that we may be entering the rare situation where a very few amount of votes—perhaps those held by a small shareholder who doesn’t even remember he has the shares in his account (or his attic)—could swing the voting. In short, the Bancrofts may be meeting in Boston in 2008. But the voting may well be in Florida, 2000 territory.

A Family Meets Today to Hear the Complexities of a Bid for Dow Jones [New York Times]
Bancrofts To Consider Murdoch Bid, ‘Close Vote' Predicted [New York Sun]
Know Your Bancrofts [New York Magazine]

We got so caught up in the excitement over the board of directors, Bancroft family, Rupert Murdoch, News Corp drama that we’d totally forgotten about the insider trading angle to this story. But fortunately we have the Securities and Exchange Commission to remind us that prior to the public learning of the deal, a Hong Kong couple with ties to Dow Board member David Li, chief executive and chairman of the Bank of East Asia, allegedly engaged in insider trading.

According to published reports, the SEC has issued a Wells Notice to Li, informing him that it plans on filing civil charges against him.

For those of you who have never gotten one—a Wells notice is a sort of like a bill from the utility company stamped Final Notice. Except that instead of shutting off your electricity, if you don’t respond to the notice you wind up getting sued by the SEC. It’s basically your last chance to convince them that they shouldn’t file a lawsuit against you. Or, as a friend of ours once put it, it’s a notice that it’s time to move your funds off-shore, get out of the country and hire some very good lawyers.

SEC to File Civil Charges Against Dow Jones Director [Wall Street Journal]

When Wall Street Journal’s Sarah Ellison broke the story late Monday that Dow Jones chief executive Richard Zannino and News Corp’s Rupert Murdoch reached a tentative agreement over lunch to bring the News Corp’s bid for Dow Jones before the board of directors, many were surprised that the offer price hadn’t budged from original $5 billion, or $60 a share.

They shouldn’t have been. Throughout the months since Murdoch first approached Dow Jones representatives with his offer, advisers to Murdoch have coached him not to increase his bid. Early on some thought he might increase the price in an attempt to overcome resistance from some members of the Bancroft family. But Murdoch’s investment bankers advised him that it was foolish to bid against himself, raising his offer at a time when the Bancroft’s had not yet indicated that they were willing to sell at any price.

Some of Murdoch’s advisers believed that a higher, second bid might have actually invited a competing bid for the company if it was seen as Murdoch’s best offer. By sticking to the original bid, Murdoch may have discouraged other potential bidders who were not sure they could outbid the deep pockets of a cash rich News Corp.
Even after negotiations with the Bancroft family began, some observers thought Murdoch might increase his bid. “While the initial $60-a-share offer represents a hefty premium over where Do Jones’s stock was trading before Mr. Murdoch’s offer became public, Dow Jones hopes the Bancroft family’s ambivalence about the Murdoch deal could help the company extract a few more dollars per share,” Ellison writes in her story today.

The thinking in the News Corp camp, however, runs completely in the other direction. The Bancroft family had already extracted value from News Corp in the form of promises of editorial independence, and had dragged out the negotiating process—taking up time and energy from Murdoch and his advisers. These discussions and concessions have been seen as part of the price News Corp was paying to buy Dow Jones. In effect, they were counted as increasing the cost of the deal.

What’s more, the Bancroft family’s continued ambivalence despite the negotiations and concessions has frustrated Murdoch and his advisers. The view within the Murdoch camp has been that as long as the Bancroft family continued to resist selling the Dow Jones for non-financial reasons, there was little point in increasing the financial incentives.

“The Bancrofts kept saying that this wasn’t about the money,” one person familiar with the News Corp strategy said. “Murdoch decided to take them at their word.”

While initially trading higher this morning, the stock dropped today to its lowest level since the Bancroft family first agreed to meet with Murdoch at the end of May. This may indicate traders now believe that Murdoch will not offer a higher price than his original bid.

Dow Jones, News Corp. Set Deal [Wall Street Journal]

For a couple of weeks, shares of Dow Jones & Company have been trading below the $60 price Rupert Murdoch offered, which most likely reflects a slight discount for risk that the deal won’t ever go through, skepticism about the notion that Murdoch might offer even more money for the media company and the belief that the deal won’t close immediately. We’ve had the Murdoch Meter, which measures the chance of Murdoch buying the company at his offer price, fixed at 90% for some time. And shares have been trading between $58 and $57.

This morning world came from across the Atlantic that negotiations with the Bancroft family were done and a deal announcement was imminent. Shares jumped on the open and kept climbing despite reports on CNBC and DealBreaker quashing the rumor. They’re now at $59. This pushes our auto-arbitrage meter up to 95%.

Ordinarily we’d just correct the meter if it moved on fake news. But we’re hearing things that are convincing us that although the Bancroft family may not yet have formally accepted the offer, an announcement may be coming soon. The right people—lawyers, bankers—are busy this weekend, not making appearances at places we expected them to be. And they are clamming up, as they often do before a deal is announced to the market. From this, well, anti-leaking we’re reading an imminent deal.

Of course, since so much of this depends on what is decided a very few individuals who happen to be descended from people who bought the company a few generations ago, this could all change. But we’re following the arbs and fake news today and moving the meter up to 95%.

We were so busy bringing you the news that the board of Dow Jones & Company and News Corp have agreed in principle on a plan to protect the editorial independence of the Wall Street Journal (apparently no one cares about Barron’s), that we neglected to update the Murdoch Meter.

Contrary to the suspicions of some, the meter isn’t set by the arbitrary whims of the DealBreaker editors and reports. It’s set by the interns.

Just kidding. We employ a complex formula employing market variables to distill the meter’s current standing. Without going into the details of our secret formula, we'll give you the outlines. We take the current share price compare it to Murdoch’s offer, and discount for information we think may not yet be fully digested by the market. Right now the Meter tells us that Murdoch has about a 95% chance of acquiring Dow Jones. (In case you need a more recently updated version, you can now click here.)

By the way, the deal is not quite done. Although the Dow Jones board, which includes representatives of the Bancroft family, may have more or less reached an agreement with Murdoch, the family has been surprisingly fractious and unpredictable through this process. It’s not clear that any attempt has been made to poll Bancroft family members on the proposal. Most likely, they haven’t even seen the details yet.

What’s more, the Wall Street Journal reports that there are still “open items” that remain. In our experience, these small “open items” that get left until the last minute either get swept away or become DealBreakers. Sometimes they remain open because nobody could be bothered to deal with the small things. After hour upon hour in a conference room, when the only thing left to drink is diet Sprite and all the cookies are raisin granola, you’re hardly in the mood to debate the eye-care plan for executive assistants. But sometimes those things end up mattering to someone who matters, or cost more than anyone imagined. We’ve walked back into conference rooms the day after to discover that our small “open items” list—usually kept on a legal pad or a laptop by the most junior person in the room—has become a list of DealBreakers. Beware the open items.

Update: Some are wondering whether this whole process is a farce. Gary Weiss writes of the agreement to protect the editorial independence, "I think any such agreements aren't worth the paper they're written on, but then again I'm cynical."

Dow Jones, News Corp. Agree On Set of Editorial Protections [Wall Street Journal]

Less than twenty-four hours after the board of directors of Dow Jones announced they were taking over negotiations with News Corp, Financial Times publisher Pearson and General Electric announced they were dropping plans to make a joint bid for the company that owns the Wall Street Journal.

The two companies had been negotiating with each other over a deal that would have combined the financial news network CNBC, Dow Jones and the Financial Times. Critics of the proposed plan said that it was too complex, would cost too much and was likely to result in job losses at the newspapers. Shareholders at Pearson had already begun to object to the company spending heavily to buy another financial newspaper. And some wondered whether antitrust authorities in the US and Europe would even permit the combination.

But for all its problems, the potential partnership was arguably the only credible alternative to the offer from News Corp. Despite the Bancrofts publicly saying they would sell the company under the right circumstances and a hunt by union representatives for an alternative buyer, no one else has emerged with a firm offer for the company. Right now it’s Rupert or nobody.

Pearson, General Electric Drop Plan for Dow Jones Bid [Bloomberg]

The potential bid for Dow Jones from GE and Pearson is looking even shakier today. Yesterday we noted that newsroom rivalry might derail support for the deal among employees of the Wall Street Journal and the Financial Times. Today the Wall Street Journal's Heard on the Street column points to other constituencies that are raising objections to the deal, including at least one member of the Bancroft family and some prominent shareholders of Pearson.

Heard on the Street agrees with our analysis that a Pearson-owned Dow Jones would likely seek cost-savings by reducing overlap between the Journal and the Financial Times.

The easiest way to meet the cost-savings goals would be for the newspapers to cut their biggest expense -- journalists. The Wall Street Journal has roughly 700 reporters and editors, and about 100 of them work outside the U.S., while the Financial Times has 510 journalists, the majority of whom are in the United Kingdom. While it is unlikely the two newspapers would be combined, they could share some stories, allowing the FT to cut its staff in the U.S. and the Journal to cut back in Europe.

The GE-Pearson bid looks weaker every time we glance in its direction. The Murdoch Meter gets moved up to the 85% mark today on the expectation that enthusiasm for this bid will continue to fade.

GE, Pearson on Defensive [Wall Street Journal]

Although Pearson PLC is being called a possible ‘white knight’ bidder for Dow Jones & Co, many in the newsroom of the Wall Street Journal are not enthusiastic about being bought by the publisher of the Financial Times. Reporters at the Wall Street Journal, many of whom regard the Financial Times as an inferior paper with low-quality “Brit journo” standards of fact-checking and sourcing, are worried that ownership by Pearson will deteriorate journalistic standards at the paper, a source at the Journal told DealBreaker.

“I took a straw poll around the office. A lot of people are worried about what this will do to the Journal’s reporting,” the source said.

Word began to circulate late on Friday afternoon that General Electric and Financial Times publisher Pearson were “in talks” about a potential joint offer for Dow Jones & Co. Over the weekend, the story ran in the Financial Times, the Wall Street Journal and the New York Times. A decision on whether or not to make a bid is expected to come within days.

A news of a possible bid from Pearson and General Electric may have the ironic effect of making the bid from News Corp more attractive. While News Corp chairman Rupert Murdoch has promised to spend more on the Wall Street Journal, expand its international presence and has announced plans to launch a new cable news network for financial news that may give Journal reporters more outlets for their reporting, a bid from Pearson and General Electric would likely involve mostly cost-cutting synergies.

[After the jump, the not-exactly-surprising news that Journal reporters aren't totally psyched about working for the publishers of the Financial Times.]

The Bancroft family has reportedly rejected a proposal prepared by its lawyers. The proposal was intended to protect the editorial independence of the Wall Street Journal and it was widely expected that it would be submitted to Rupert Murdoch this week. After debating the proposal, however, the family has apparently decided that it did not offer adequate protection for the paper.

To grasp the most striking thing about the rejection of the proposal you have to know something about the folks who prepared it. One of the law firms representing the family is Wachtell, Lipton, Rosen & Katz (they are also represented by Boston law firm Hemenway & Barnes), which is legendary for its defense of corporate boards and management against unsolicited takeover offers. Name plate lawyer Marty Lipton is often credited with inventing the so-called ‘poison pill’—a controversial tactic that prevents hostile takeovers by creating new shares of stock to dilute the ownership of the would-be acquirer. If Lipton—or the top-of-the-class, Ivy-league trained lawyers who work for him—has drawn up a plan to defend your interest in a company and you conclude it’s too weak, you might not quite be operating according to a map that has a lot of overlap with a territory called reality.

[More on the Bancroft Family follies after the jump]

It looks like the Bancroft family blinked first, issuing a proposal on editorial independence to NewsCorp today. Murdoch’s not likely to agreed to the proposal, however. Even the Bancroft’s don’t sound too hopeful, noting that “This is not a done deal.”

Reporting on itself, the Journal said that negotiations between Murdoch and the Bancrofts would only continue if family is convinced that it has safeguarded. But it’s safe to say that Murdoch acquisition ambitions moved one step closer to reality with this move by the Bancrofts. One rule of negotiating deals it that the side that comes back to the table first certainly isn’t looking to walk away altogether.

Also, last week Dow Jones granted 135 managers eligibility for severance pay in the event of new ownership. As part of this move, Dow Jones CEO Richard Zannino's current golden parachute, which is worth $19.5 million would increase by 20%-30%. Nothing like promising management a payday to get them behind the deal.

Both these events would have moved the needle on the Murdoch meter if not for the ominous sign that arose yesterday: Jim Cramer started giving unsolicited advice to Murdoch. This clearly spells trouble. Any progress from the Bancroft move and the new golden parachutes was completely erased by the entrance of the first citizen of Cramerica.

[This report filed by Senior Rupert Murdoch correspondent Peter Ribic.]

Bancrofts Set Revised Safeguard Proposals [Wall Street Journal]
Dow Jones Expands Its Golden Parachute [Slate.com]
Rupert’s Eleven-Year Hunt [New York Magazine]

We touched on this story in Opening Bell so we won’t spill too many pixels on it now. Suffice to say, we’d all heard that General Electric was looking for a partner to buy Dow Jones and defend its CNBC property against the challenge of a Fox Business Network-Wall Street Journal combination. But we didn't think much of it.

Sure, Microsoft was a natural partner, having built MSNBC with GE. And while Microsoft isn’t eager to become a newspaper publisher, maybe they’d want to get in on Dow Jones strong web presence. They used to have a taste for this sort thing, right? Until very recently, CNBC’s entire web presence was tucked away in a little corner of Microsoft’s MSN.

But that was then. This is web 2.0. The big players in the internet space aren’t so enthusiastic about creating content these days. And certainly not for paying people to create content. It’s all “user-generated” and “social networking” all the time—think MySpace, YouTube, and even Last.fm. Even CBS’s purchase of WallStrip might morph into something more sophisticated if they let a million WallStrips bloom and do for finance user-videos what FunnyOrDie is doing for comedy. Microsoft has the cash but not the desire to own Dow Jones.

The implausibility of all the “competing” deals that are currently “on the table”—none of which have actually gone through the trouble of being competitive with News Corp’s $5 billion bid and which are not actually on any tables—actually make Murdoch’s bid more likely to succeed. The Bancrofts, having very publicly declared a willingness to sell, must now look around and wonder: is that it? And, yes, it seems that it is. Last week we had Murdoch at 80%. At the start of this week, post-Microbalk, he’s reach 85%.

Rupert Murdoch has an unlikely—and probably unwitting—ally in his quest to acquire Dow Jones & Company: Democratic presidential front-runner Hillary Clinton. Last month Hillary spelled out some of her positions on taxes and economics, including a plan to increase capital gains taxes in a way that might penalize the family that controls Dow Jones if they held off selling now.

The Bancroft family, which owns around 16.4 million supervoting Class B shares that allow it to control Dow Jones, would face a large capital gains tax bill if they sold their shares for cash instead of exchanging them for shares in another company. But many political observers expect the capital gains tax rate—currently 15%—to go up if a Democratic candidate is elected president, meaning that the Bancrofts might face an even larger tax bill if they sold their shares of Dow Jones in the future. They would also face a higher tax bill if they exchanged their Dow Jones stock for stock in another company and sold those shares later. Selling to Murdoch now might be the last opportunity the family has to avoid higher taxes.

Clinton has promised to raise capital gains taxes, and other democratic presidential candidates have followed suit. It’s highly improbable that Clinton’s tax policies are intended to aid Murdoch in his bid for Dow Jones but there’s no escaping the fact that objectively-speaking, as the Communists used to say, Clinton is working for Murdoch’s interests.

This wouldn’t be the first time that Murdoch and Clinton have found themselves on the same side. Despite his reputation as a political conservative, Murdoch became a supporter of Clinton while she was a US Senator, even hosting a fund-raiser for her.

How small of a Bancroft minority could block a sale of Dow Jones & Company to Rupert Murdoch’s News Corporation? In this morning’s New York Times, “Market Place” columnist Floyd Norris sketched how the nature of the supervoting shares of Dow Jones make it possible for a minority of the family to veto an acquisition if Rupert Murdoch attempts to buy the outstanding shares of the company through a tender offer.

“Under Dow Jones rules, Class B shares have 10 votes a share, while Class A shares — those traded on the New York Stock Exchange — have but one vote a share. When Class B shares are sold, however, they become Class A shares and lose their special voting rights. That increases the relative weight of the remaining Class B shares,” Norris writes. “At least theoretically, investors owning just 9.1 percent of the stock, or less than 8 million shares, could control the company if those were the only Class B shares left outstanding after the other shares were sold to Mr. Murdoch,” Norris says.”

DealBreaker ran some back of the envelope calculations and discovered that a minority controlling just around a quarter of the family’s Class B shares could prevent a successful tender offer acquisition by News Corp.

[After the jump, how a small minority of Bancroft shares could block a takeover.]

Somewhere behind the sheer, black façade rising 38 stories from a sunken plaza on 52nd Street and the Avenue of the America, representatives from News Corp are expected to meet with representatives from the Bancroft family today. Inside the building—officially the CBS Building but known to neighbors as the “big black rock”— are the offices of Wachtell, Lipton, Rosen & Katz, the law firm retained by the family that controls 64 percent of the voting power of the Dow Jones & Company.

The twin questions asked by those of us outside the tower are: what do the Bancrofts want and what will Rupert Murdoch give them? Murdoch, who heads News Corp, has offered sixty dollars per share for Dow Jones, a sixty-seven percent premium from where the stock had been trading before the takeover bid was announced. He has also offered the Bancroft family and the Wall Street Journal, which is owned by Dow Jones, both flattery and autonomous editorial board for the Wall Street Journal. He has also compared his own family to the Bancrofts, referring to both as newspaper families. Newspapers have described this as a “charm offensive.” What he hasn’t done is indicate that he might be willing to pay even more for the company.

This morning we’ve also heard another thing Murdoch won’t do: cede control of that autonomous editorial board to the Bancroft family. Over the weekend, the Wall Street Journal reported that the Murdoch has said the board would comprise "people with absolutely no business connections to me nor the family." Echoing a famous line about having cake and eating it, Murdoch reportedly said the family "can't sell [Dow Jones] and keep it" by controlling the editorial board.

Murdoch May Make Concessions, Up to a Limit, in Dow Jones Talks [Wall Street Journal]
Murdoch May Use `Charm Offensive' on Bancroft Family [Bloomberg]

Investment bankers at one of the banks advising Rupert Murdoch’s News Corp on the bid for Dow Jones & Company celebrated last night when news broke that the Bancroft family had agreed to meet with Murdoch. The bankers had advised News Corp not to increase its offer for the company, defying speculation that Murdoch might attempt to buy-off the Bancroft’s reluctance to sell with more money. Last night’s announcement by the Bancrofts that they would meet with News Corp and consider offers for the company was taken as a vindication of the bankers advice, a source working at one of the advisors to News Corp said.

“It was big smiles all around. High-five time,” the banker told DealBreaker. “We told them not to offer a dime more. We always thought these people would cave.” According to the banker, it literally was 'high-five' time, with arms extended and hands slapping in celebration of the Bancroft move.

Instead of offering more money Murdoch has for weeks engaged in what some have called a “charm and promise” strategy—asking for a meeting to introduce his family to Bancrofts, praising the companies media properties, promising to invest money to grow the Journal’s international bureaus and offering assurances of editorial independence. Everything, that is, except a higher bid.

Murdoch’s $5 billion bid came in at a sixty-seven percent premium to where the company’s shares had traded just prior to the news of his unsolicited offer. Many observers thought the family was holding out for more money before they would agree to meet with representatives of News Corp. Investment bankers advising News Corp on its bid recommended against offering more money prior to a meeting.

“The first rule of deal club is you don’t negotiate with yourself. There were no other bidders, and they wouldn’t come to the table. Was Murdoch supposed to outbid his own offer?” the banker said

One danger of offering more money prior to the opening of negotiations was that the new offer might be looked at by the Bancroft’s as a starting price, setting expectations for an even higher final selling price. A sixty-five dollar second offer might set the stage for a seventy-dollar closing price, the banker said his firm warned News Corp.

The investment bankers believed that eventually the Bancrofts would negotiate with Murdoch without the prompting of a higher offer. The term they used was “over-determined” to describe what they viewed as the most likely result, the source said. The source cited several factors putting pressure on the Bancrofts to negotiate, including pressure from public shareholders and institutional investors, dissent within the family, the absence of a competing bidder, the lack of a credible internal business plan to raise the share price near Murdoch’s offer, fear the Murdoch could withdraw his offer, declining advertiser enthusiasm for newspapers and consolidation in the business news industry.

“This is a win for Murdoch and News Corp and we’re just glad we helped them get here,” the banker said.

The Bancroft family’s decision to meet with Rupert Murdoch means Dow Jones & Company is for sale, according to an employee of the company.

“If they meet, they sell,” said a Dow Jones employee familiar with the thinking of the Bancrofts.

Last night the family released a statement announcing their willingness to meet with News Corp, the media company run by Murdoch, while the board of directors of Dow Jones held a special meeting to discuss the bid. Earlier the family had rejected the $5 billion bid and refused to meet with Murdoch. During the meeting the statement was called “preliminary” but it was not changed after the meeting.

The reporting from the Wall Street Journal and the New York Times also conveyed the impression that the Bancrofts are ready to sell Dow Jones, which they control through their ownership of super-voting class b shares.

“Dow Jones & Co.'s 125-year history as an independent media company could be nearing an end,” the Wall Street Journal’s reporters wrote in the story that broke the news of the Bancroft family change of heart. DealBook, the deal blog of the New York Times, echoed that sentiment, asking “Is this the beginning of the end of an independent Dow Jones & Company?”

The Bancroft family’s statement also announced a willingness to consider offers from other bidders.

Rupert Murdoch's bid for Dow Jones & Company is heating up again.

The family that controls Dow Jones agreed to meet with News Corporation, the media company headed by Murdoch . News Corp made an unsolicited bid for Dow Jones earlier this month. Until now the Bancroft family, which controls 64% of the voting power of Dow Jones largely through its super-voting class B shares, had refused to meet with Murdoch or representatives of Dow Jones to discuss the offer.

"Since first receiving the News Corporation proposal, the Family has carefully considered and discussed among ourselves and with our advisors how best to achieve that overarching objective, while serving the best interests of the Company's various constituencies,” the family said in a preliminary statement first reported by the Wall Street Journal, which is owned by Dow Jones.

“After a detailed review of the business of Dow Jones and the evolving competitive environment in which it operates, the Family has reached consensus that the mission of Dow Jones may be better accomplished in combination or collaboration with another organization, which may include News Corporation,” the statement says.

In early May, News Corp offered $5 billion for Dow Jones, a sixty-seven percent premium over where the stock price trading before the bid. Through representatives on the board of directors of Dow Jones, members of the Bancroft family representing a majority of the voting power declined the offer. The board of directors has officially take no action on the offer. Since making the bid Murdoch has attempted to win support from the Bancroft family, but he has not increased his offer. In recent weeks some analysts began predicting that Murdoch would withdraw the offer if the family continued to refuse to negotiate.

The Wall Street Journal said the statement would be finalized after the conclusion of a meeting of the board of directors, which was underway tonight. At the time this was posted, no statement had been filed with the Securities and Exchange Commission on behalf of Dow Jones or the Bancrofts.

The statement may mean that the Bancrofts are willing to accept an offer from Rupert Murdoch. But by indicating a willingness to sell, they may also be hoping to attract other bidders. Tonight’s statement affirms that the family will also consider other bids.

Bancroft Family Plans to Discuss Dow Jones Bid With News Corp. [Wall Street Journal]
Bancrofts' Statement on Dow Jones Bid [Wall Street Journal]