Rupert Murdoch's News Corp has clinched a deal to buy Wall Street Journal publisher Dow Jones & Co for $5 billion ending a century of family ownership. The companies said Wednesday that they signed a definitive agreement after the deal won sufficient support to pass from a deeply divided Bancroft family, which has controlled the storied newspaper publisher for generations, the Associated Press (AP) reported.
The deal will also expand Murdoch's massive global media and entertainment empire News Corp, which owns the Fox broadcast network, Fox News Channel, the Twentieth Century Fox film and TV studio, social networking site MySpace, newspapers in Australia and the UK, and several satellite TV broadcasters. In addition to the Journal, Dow Jones owns Barron's financial weekly, Dow Jones NewsWires and the Ottaway community papers.
Dow Jones and News Corp said in a joint statement that Bancroft family members and trustees representing 37 per cent of the shareholder vote agreed to support the deal. Combined with the 29 per cent of the vote held by public shareholders, who are likely to support Murdoch, the deal is now assured of passing.
A member of the Bancroft family or another mutually acceptable person would be appointed to News Corp's board of directors as part of the agreement.
The Bancroft family, descended over several generations from an early owner of Dow Jones, Clarence Barron, clashed long and hard over whether to sell to Murdoch, with several members saying they feared the quality and independence of the paper would suffer under him.
Some family members actively sought alternatives to Murdoch but without success, the AP report said. One of them, Leslie Hill, quit Dow Jones' board as the deal edged toward completion, the Journal reported. Two weeks ago, another director, German publishing executive Dieter von Holtzbrinck, also quit in protest.
A family spokesman said, “It is our most fervent hope that in the years to come, the Wall Street Journal will continue to enjoy, and deserve, the universal admiration and respect in which it is held all over the world.”
"Given the Bancrofts's long and distinguished history as custodians of Dow Jones, we appreciate how difficult this decision was for some family members," Murdoch said in a statement. "I want to offer the Bancrofts my thanks, and an assurance that our company and my family will be equally strong custodians."
The paper's managing editor, Marcus Brauchli, reassured newsroom employees that the Journal will maintain its editorial independence. “It is too early to know how or even whether News Corp ownership might alter priorities or structures at Dow Jones,” Brauchli wrote in an email to Journal staffers early Wednesday. “Our current and likely future owners have given formal assurances, however, that the newsroom will retain its independence.”
The Bancroft family initially rebuffed Murdoch in early May, but then agreed to reconsider. Last week they heard exhaustive presentations on Murdoch's plans but remained divided. Wrangling continued past a Monday deadline for them to signal their intentions, and on Tuesday the break came when a holdout trust agreed to support the deal, apparently after Dow Jones agreed to pay the family's advisers' fees, the Journal reported.
Murdoch had long been interested in owning Dow Jones, but it was widely assumed that the Bancroft family would not sell. In the end, his price of $60 per share – a good 65 per cent over the level of Dow Jones' shares before his offer became public – proved too rich to turn down.
The companies' statement put the value of the deal at $5.6 billion, but it was not clear if that figure also included the assumption of debt, and the companies did not provide a breakdown of how they arrived at that figure. Dow Jones' most recent financial filing shows it has 83.8 million shares outstanding, valuing the company at $5 billion at Murdoch's price of $60 per share.
Murdoch has said he would invest in the Journal's Washington bureau and digital operations and expand its domestic readership, taking on the two other national US newspapers, the New York Times and Gannett Co's USA Today. He has also said he would expand the Journal's presence overseas, where it would go up against other business publications including Pearson PLC's Financial Times.
Murdoch also plans to launch a business-themed cable news channel in the United States later this year to rival General Electric Co's highly profitable CNBC network. Murdoch hopes Dow Jones' news resources and brand name help jumpstart that channel, but he would have to negotiate out of a deal CNBC has to use Dow Jones news through 2012.
Over the years, the Bancrofts' ties to Dow Jones have become more remote, and none of them work in the company's day-to-day affairs. Spread out across the country, the family's three dozen adults include a former airline pilot, investment bankers, and philanthropists.
The Bancrofts long considered themselves stewards of a great American journalistic institution, but they also had differences over the future direction of the company. A decade ago, two younger family members publicly agitated for change at Dow Jones and were sidelined. The Bancrofts had also angered Dow Jones shareholders in 2005 when the company passed provisions that would allow the Bancrofts to maintain their voting control even if they reduced their ownership stake.
Dow Jones, like several other newspaper companies, is controlled by a family through a special class of shares with powerful voting rights. Despite owning just 25 per cent of the company, the Bancrofts exercise 64 per cent of the shareholder vote through the more powerful Class B shares, which are not traded publicly.
Long though to be an insulation against outside pressure or unexpected takeover offers, the two-class share structure did not prove to be an impediment to Murdoch, who knew of the family's persistent unrest with Dow Jones' lagging share price.
Even though it was a pioneer in providing financial news and data, Dow Jones has fallen behind rivals such as Reuters Group PLC and Bloomberg LP in the business of providing real-time financial information. Its venture into the data delivery business, Telerate, turned into a bust, and it sold the business in 1998 for $510 million after paying $1.6 billion for it a decade earlier.
Hill, a member of the Bancroft clan, resigned late on Monday. In a letter detailed in the Journal, Hill admitted that the financial offer was a good one but said that it was not sufficient "to outweigh the potential ramifications of the loss of an independent global news organisation with unmatched credibility and integrity".
"It is ironic indeed for the Bancroft family to have to pay 30 shekels of silver to their investment bankers, and 30 shekels of gold to their corporate lawyers, for scaring them into betraying their 105-year family loyalty to Dow Jones independence," said former Dow Jones director James Ottaway.
A union representing Journal reporters and other Dow Jones employees has objected to Murdoch's bid, saying he would downgrade the quality of the paper's coverage and tilt its stories to suit his business interests. Former board member James Ottaway Jr also opposed ownership by Murdoch.
Murdoch countered with a promise not to interfere with the paper's newsroom and has agreed to set up a five-member board, whose initial members would be jointly chosen by both News Corp and Dow Jones, with the power to approve the hiring or fire top editorial officials.
In a letter to readers, Journal publisher L Gordon Crovitz sought to allay concerns about the transition. “Readers can rely on this: The same standards of accuracy, fairness and authority will apply to this publication, regardless of ownership,” Crovitz wrote, adding later on: “My colleagues and I hope that as part of a larger company we can extend our journalism more broadly, to serve more readers better.”
