Bancrofts and Dow Jones’ board have paid the price for trying to hold on to their prized possession, Dow Jones. A shareholder class action lawsuit has been filed against them in the Supreme Court of the State of New York, for rejecting the takeover bid by News Corp. ‘in bad faith.’
The investor lawsuit accuses the Bancroft family and directors of Dow Jones for failing to properly evaluate the bid. It has been filed by Nora Vines and criticizes the people in-charge of showing poor business judgment. The lawsuit has been filed in the aftermath of the rejection of a takeover bid by Murdoch’s News Corp. On Tuesday this week, News Corp. had made an unsolicited bid to acquire Dow Jones. The proposal, which valued Dow Jones at $5 billion, was rejected by the board within hours.
The Bancroft Family, holder of 64 per cent voting rights in Dow Jones indicated that more than 50 per cent of the votes did not favor the deal. Murdoch had proposed $60 per share of Dow Jones, much higher than the normal value at which the shares were trading during past couple of months. The language of the suit runs something like this:
(The decision of the board) represents an ill-considered, hasty reaction, which did not satisfy their duty to obtain adequate information before rejecting a bona fide acquisition proposal.
The suit also claims that the deal was rejected so that the Board and Bancrofts could continue their dominance over the company. Bancrofts weren’t available for a comment.
I believe this lawsuit is only a harbinger of more developments to follow. The company might be heading for a bidding war.
