Rupert Murdoch, the multimedia mogul, made an unsolicited bid on Tuesday for Dow Jones & Co., publisher of The Wall Street Journal. His bid, however, was rebuffed within a matter of hours. The Bancroft family, which owns more than 50 per cent of the votes at Dow Jones, firmly thumbed down Murdoch’s News Corp. $5 billion bid.
Murdoch’s News Corp. is the owner of Fox News, the New York Post, TV Guide, MySpace and 20th Century Fox movie company. It offered to buy all outstanding Dow Jones stock for $60 per share, much high than the rate at which the company’s shares were trading before the offer was made. Shares of Dow Jones had traded between $32 and $40 a share over the last year and had opened at $37 on Tuesday morning. After the offer was made public, the shares jumped to close at $56.20 at the end of the day’s trading. The shares gave up hardly any ground on Wednesday, after the bid was rejected, and traded at $55.89 at the end of the day.
Murdoch is eyeing up Dow Jones for the prestige that would come with owning The Wall Street Journal, America’s most influential business newspaper. The deal also becomes important for the reason that News Corp. is in the process of launching a new business channel on cable. The new business channel would benefit greatly from the expertise and strong brand name of the Journal and Dow Jones’ other holdings, including Dow Jones Newswires, Barron’s and its part-ownership of SmartMoney magazine.
Opposition to the bid
Several parties oppose the proposed takeover bid. The Bancroft family, as already mentioned, has rejected the present bid. Besides the Employee union at Dow Jones doesn’t seem to be in favor of a Murdoch takeover. Steve Yount, president of the union, referred to the prospect of ownership by Murdoch ‘a disaster.’ He said:
This is a premier publication, and everything that News Corp. brings to the table runs the risk of tarnishing that reputation.
Several other parties, which stand for a free press, also oppose the deal on the ground that Murdoch in the past has interfered in the newsgathering role of his media outlets. Even the Democrats in Congress seem to be against any such deal. The Democrats will do anything to slowdown the deal, including pressuring regulators for an investigation or scouting for rival purchasers.
Prospects of a bidding war
Dow Jones’ board has said that it would ‘take no action’ since the Bancrofts are against the present deal. However, the board hasn’t rejected the offer outright. This has started speculations that either Murdoch will inflate his offer of $5 billion or other rivals may enter the race. Of course, there is a possibility of shareholder’s lawsuits against the board if it continues to turn down other proposals in the future. Frankly, the 65 per cent premium at which News Corp. has made its offer might be too lucrative to pass up.
Murdoch known to be a tough pursuer might eventually benefit from a unique voting pattern at the Dow Jones. The Bancroft family owns nearly 25 per cent stake in the company but holds 64 per cent of the voting rights. The family says that 52 per cent of the votes are opposed to the deal. This leaves out 12 per cent who have not agreed to reject the offer. The family consists of some three dozen members who have different aspirations from their holdings. The family has rejected takeover offers in the past but it will only take a handful of members to swing the vote the other way around.
No rival companies have reportedly expressed a desire to enter the bidding war until now. A different picture might be in the offing given a few days time.
Source: Washingtonpost
