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]
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The Meeting: What Will Rupert Do? What Do the Bancrofts Want?
By John Carney
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.
Yesterday a Bancroft clan meeting took place in Boston to discuss various ennui of the whole News Corp. offer-shtick (Will scantily clad pictures of the genetically blessed Murdoch spawn, Lachlan, be included in the deal? Were Rupert and Colonel Sanders separated at birth?). What transpired? As is the norm for this as-exciting-as-backdating story, a whole lot of nothing. Some people (William Cox Jr., his four children, who together control 15% of the family’s total Class B shares) didn’t even show up, though it didn’t stop them from weighing in on the situation. Christopher Bancroft said that he opposes the sale to News Corp., fearing that it would threaten the Journal’s independence. Viewed as an “influential” member of the family, with his two siblings, Bancroft controls roughly one-third of the family’s stake in Dow Jones, and is also one of the company’s sixteen directors.
Yesterday Bancroft said that he’s “open to any situation that benefits the Wall Street Journal and Dow Jones and its shareholders. At the moment, I don’t see anything that would do that.” He added that he has a “strong emotional connection to the paper” and doesn’t want to “pull the rug out” on the staff, who he feels responsible for. Bancroft said that he even sent replies to letters from fifty Journal reporters (it’s unclear if these were actual letters or email letters but the sentiment is duly noted).
Meanwhile, there’s a bunch of unexpressed anger going on within the family. Some—mostly the younger Bancrofts—feel they haven’t truly been included in the decision making process. The youth vote also wants to explore the idea of a third-party investor, as the question as been raised regarding whether or not Dow Jones can survive on its own. And of course there’s the heated debate over who should’ve been covering “Pinch” Sulzberger when he stole home during the Bancroft-Sulzberger Kick-Ball Jamboree of ’89. But that’s been brewing for a while, and doesn’t really have much to do with News Corp.
Key Dow Jones Holder Cites Opposition To Murdoch Bid [WSJ]
This much is certain. One way or another, the $5 billion offer from News Corp to buy the Dow Jones company will not be outstanding forever. At some point News Corp will offer more money for the company, the controlling shareholders will accept an offer, a new bidder will emerge or News Corp will withdraw its offer. Jeff Greenfield, an analyst at Pali Research, is telling his firm’s clients that the last possibility—a withdrawal of the offer—is most likely.
”We suspect News Corp. will officially announce the termination of its acquisition announcement over the course of the next couple of weeks and leave Dow Jones to fend for itself,” Greenfield writes in a note to clients (quoted in the Associated Press).
Greenfield does not appear to have any inside information about the plans of News Corp or its chairman, Rupert Murdoch. Instead, the note relies on something more like common sense to make the call that the company will walk away from the bid. The Bancroft family, which controls Dow Jones through its super-voting class B shares, has twice indicated it won’t accept the offer. Greenfield describes waiting for them to change their mind as “silly.”
The note reflects the widespread impression that News Corp and Murdoch are growing frustrated with the refusal of the Bancroft’s to enter into a deal. So far, the Bancroft’s have refused to even meet with Murdoch.
Reuters quotes from the note: “We believe News Corp. is increasingly frustrated with the Bancroft family,” said Pali Capital analyst Greenfield . “Given no apparent desire by Dow Jones’s controlling shareholders to negotiate, News Corp. is left with little choice other than to walk away from Dow Jones [for now].”
Greenfield’s prediction that News Corp will withdraw its bid seems to rest on his view that the acquisition of Dow Jones is not a “must-have” for the company.
Murdoch may lose interest in Dow Jones bid [Reuters via CNNMoney.com]
Analyst Expects Murdoch to Drop Bid [Associated Press via Forbes.com]
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The Dow of Murdoch: Why The Wall Street Journal Should Probably Trust Rupert Murdoch (And Why They Shouldn’t)
By John CarneyOne 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.
A 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]
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