$5B BID FOR WSJ
Success for the $5 billion takeover bid News Corp. has made for Dow Jones hinges on whether the offer will entice the controlling Bancroft family to seriously weigh the offer.
While Dow Jones said yesterday that Bancroft family trusts controlling just over 50 percent of the vote are against the deal, sources said many of the younger Bancrofts want to sell and it is the family’s older generation that is against the idea.
Of the roughly three dozen Bancroft family members who control 64 percent of the vote at Dow Jones, at least 10 are known dissidents.
Indeed, part of the reason News Corp. is offering a 65 percent premium over Dow Jones’ recent stock price is to “make the offer incredibly compelling in the eyes of the market,” said one source familiar with News Corp.’s thinking.
Already, T. Rowe Price, which ranks as Dow Jones’ largest shareholder with an 11 percent stake, said the price “seems fair.”
The offer is so large that industry watchers say it most likely compels Dow Jones’ board to at least enter into negotiations with News Corp, which owns The Post, as failure to do so may open the door for credible shareholder lawsuits claiming Dow Jones’ board failed in its fiduciary duty.
Bloomberg data shows that trading volume for Dow Jones stock was 45 times higher than normal yesterday with a large amount of buying occurring at the end of the day when the price was above $54 per share.
The company’s shares swelled 55 percent, or $19.87, to close trading yesterday at $56.20.
The increase adds another layer of concern for Dow Jones given that analysts think its stock could plummet to below $35 if the bid is rejected.
Not only would yesterday’s investors stand to lose, but longtime Dow Jones investors, who voiced concerns about CEO Richard Zannino’s pay at the last shareholder meeting, would likely be riled, too.
News Corp.’s bid is believed to be high enough to dissuade any private equity buyers from jumping into the fray, meaning that News Corp. has essentially erased any competition for Dow Jones since strategic newspaper buyers don’t have the financial muscle to match or top the offer, banking sources say.
Sources said News Corp.’s strong balance sheet and rising stock price, combined with low interest rates, means that the company has room to make an even sweeter offer for Dow Jones.
Just as News Corp. is using a $5 billion run at Dow Jones to court a family with controlling interest, private equity firms Blackstone Group and Providence Equity Partners used a similar strategy to take advantage of the schism that roiled newspaper company Freedom Communications’ Hoiles family in 2003. At the time, some members of that family’s fourth generation wanted to cash out and others preferred to continue running the business.
News Corp., which offered $60 per share for Dow Jones, has called on the banking services of J.P. Morgan to help with the deal – the bank was responsible for crafting the Freedom buyout.
With News Corp.’s MySpace testing a news aggregation service and Dow Jones’ strong online presence through both The Wall Street Journal Online and MarketWatch, industry watchers say the move is a way to capture an even larger share of the burgeoning online advertising market. Moreover, sources said that News Corp. sees opportunities to extend The Journal’s position as a top brand in the U.S. around the globe.
Should the offer be accepted, Dow Jones, which currently suppplies content to General EElectric-owned CNBC, would likely provide content to FFox’s planned business cchannel.