Rupert Murdoch's bid for Dow Jones seems to have caught many people off guard. Why would he want to make such a move?
I can see at least three attractions.
First,
The Wall Street Journal is a trophy property. Murdoch's empire is big enough that he can afford a trophy when he wants one -- and he goes after these hard as the premium bid suggests. Probably the closest parallel is his acquisition of
The Times of London 25 years ago.
Second, drawing on the resources of
Dow Jones would be a big plus to his announced plans to start a cable business channel. Dow Jones does have an existing content sharing contract with
CNBC. I'm not sure how he would get out of it, but there probably is a way.
Third and maybe most important: Murdoch has said in his speech to the
American Society of Newspaper Editors annual convention two years ago and other places that he believes in moving quickly to a digital future. He has acted that way, too, with the big-dollar purchase of
MySpace, which so far has proven hard to monetize. Dow Jones is probably further up the digital curve than any other American newspaper company -- more than half its earnings now come from Internet enterprises.
How would Dow Jones fit with Murdoch's other holdings?
It is not necessarily a close fit. It does give him a whole lot more presence in American publishing than the
New York Post provides.
But another part of the appeal may be that the
Journal and Dow Jones are truly global businesses. In that respect, peer competitors are
Reuters,
Bloomberg and
Pearson/
Financial Times.
If the Bancroft family, which controls the majority of voting stock, opposes Murdoch's bid, is that the end of it? Can he still prevail?
If the Bancroft family maintains a united front, they can vote the offer down. But that is a huge "if." There will be intense pressure from other shareholders to accept. Also the family has three dozen individuals and no direct role in running the newspaper parallel to the Grahams and Sulzbergers (of
The Washington Post and
The New York Times, respectively). Division within the family on whether to entertain the offer is to be expected and has already been reported. It is not an offer they can't refuse, but the premium will make it hard to resist.
One possibility would be for family members who want to retain control to buy out others who want to cash in as happened several years ago at
Freedom Communications.
How long is it likely to take for this attempt to play itself out, whether successfully or not?
There is no way to tell for sure. Typically six to nine months.
What could journalists and readers expect the impact of Murdoch ownership on
The Wall Street Journal to be?
Apprehensions are understandable. This is a time of transition for Dow Jones and the
Journal with a relatively new CEO and a new managing editor named last month. A critical question would be whether Murdoch installs his own people and his own journalistic program.
I wouldn't take it as a given, though, that he will turn the operation on its head or even change it for the worse. Don't look for pinups on page three. Murdoch is too smart for that.
The Times of London transition included a big dust-up with then-editor Harold Evans. But I think most would say he has been respectful of that paper's traditions and seriousness.
What effect if any would this have on other news organizations? Does Murdoch's bid for Dow Jones make similar moves by others likely?
To state the obvious, these are turbulent times for newspaper companies, with shareholder pressure and ownership changes common. Theoretically, any company could be vulnerable --
Gannett or
McClatchy, for instance. But I don't see why other companies would fetch anything like the 67 percent premium Murdoch offered.
The New York Times is probably the closest parallel -- an underperforming company with a trophy newspaper at its core, which could attract buyers. So far, though, management has been successful in resisting shareholder pressure to change its ownership structure.
What happens next?
I expect that other shareholders pushing for consideration of the merger will be heard from soon. More than half of Dow Jones shares changed hands yesterday -- presumably with merger-and-acquisition specialists taking out patient value investors who had stuck with the company through tough times.
I also think there is some guidance here from the collective wisdom of the market. Dow Jones shares rose yesterday to 75 percent of the premium -- not all the way to $60 a share but to $54. That says Wall Street thinks there is a 75 percent chance the deal will happen. Even after the announcement last night by a Bancroft family representative that they opposed the deal, shares have fallen only a little this morning. So the money people continue to bet that negotiations will play out, and a deal will happen.
