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Celebrations As Bancrofts ‘Cave’ Among Murdoch Advisors

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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.