Wonderful. Let's hope the old coot doesn't turn it into the FOXNEWS of the stock market world.MSN wrote:
Murdoch seals Journal deal
Dow Jones’ controlling shareholders give their OK to Rupert Murdoch’s $5 billion offer. But will the big bet pay off for News Corp.?
Rupert Murdoch got his trophy.
After weeks of back and forth, it looks like Murdoch's News Corp. (NWS, news, msgs) has succeeded in a years-long quest to buy the parent of The Wall Street Journal.
"The Bancroft family has accepted," John Prestbo, editor and executive director of Dow Jones Indexes, told reporters earlier today in Chicago. Dow Jones (DJ, news, msgs) "will be part of News Corp.," Prestbo said.
Murdoch now has enough support from reluctant Bancroft family members to make the deal happen, The Journal reported today.
For News Corp. shareholders, Murdoch's victory raises questions about whether he can make the $5 billion investment pay. For the rest of the media industry, it creates a monster competitor, one that still has the financial wherewithal to make more acquisitions.
"I thought that the proposal made sense economically on both sides," UBS Investment Bank analyst Mike Morris said today. "Both that the Dow Jones shareholders were receiving very good value for what they held and News Corp. had the potential to maximize the value of its broad platform."
Earlier this morning, the future of the deal was still up in the air: A report published in The Journal said Murdoch had more than 30% of Dow Jones voting power lined up in support of his offer, but there was resistance among the Bancrofts, who control 64% of the votes that will make the decision on any sale.
Last night, one issue still under discussion was the creation of a fund to cover $30 million in fees for financial and legal advisers to the family, The Journal reported.
At one point late yesterday, News Corp. said it was "highly unlikely" to proceed with the bid for Dow Jones without solid support from the Bancrofts.
It took Murdoch 11 weeks to get approval for his proposal from the Dow Jones board, a win he nailed down earlier this month. To succeed with the deal, Murdoch needed about half of the Bancroft family's votes.
About 29% of the voting power that matters is associated with Dow Jones shares that are publicly held, and most Wall Street observers believe that nearly all of those votes will be cast in support of Murdoch. The last 7% the voting power is held by the Ottaway family, which opposes the deal. Jim Ottaway Jr. is a former member of the Dow Jones board. The Bancrofts own just 25% of the company but control 64% of the voting power through ownership of special Class B shares.
Shares of Dow Jones closed up $5.81, or 11.3%, to $57.37 today; shares had fallen $2.89, or 5.3%, to $51.56 in trading yesterday amid doubts that the deal would be approved. News Corp. shares fell 10 cents to $22.74 today.
News that the deal will go through ends weeks of public hand-wringing by the Bancrofts. Leslie Hill and Dieter von Holtzbrinck, two Bancroft board members, abstained from a July 17 vote in which the Dow Jones board approved the sale, according to The Wall Street Journal. And Christopher Bancroft, who had recently been trying to accumulate voting shares to fend off Murdoch, reportedly left the meeting early.
Michael Elefante, the trustee for the Bancroft family, voted in favor of the deal.
Murdoch has been itching for The Journal and its parent, Dow Jones, for years. CNBC's Jim Cramer said Murdoch first talked to him about acquiring Dow Jones 11 years ago, according to a story he wrote in New York magazine in June.
Wall Street has been buzzing for weeks over whether Murdoch's aggressive offer was ingenious or insane, and many observers believe that the deal is another savvy move for Murdoch.
"I think that Mr. Murdoch is still an entrepreneur and will continue to look at acquisitions and/or divestitures that he considers to maximize the value of the company," UBS' Morris said today.
"He's a visionary," Benchmark analyst Edward Atorino said earlier this month. "When he started the Fox Network, everyone pooh-poohed it. Nobody thought he could do it. He spent lots of money to build it into a major powerhouse."
In the weeks since Murdoch first offered $5 billion, or $60 per share, on May 1, Dow Jones' stock has soared 59% while shares of News Corp. have lost 5.8%.
The Dow Jones deal has the potential to send ripples throughout the media industry, Atorino said, by creating a competitor for General Electric's (GE, news, msgs) CNBC, Bloomberg and Reuters (RTRSY, news, msgs).
The move is integral to Murdoch's long-planned Fox Business Channel, which is expected to debut later this year.
"Instead of building it, he's buying it," Atorino explained. He needs staff, content and a brand name, Atorino continued, and with The Journal, he gets a huge organization within the world of financial news. Murdoch "wants to take the Fox broadcast business and make it a global network."
UBS analyst Morris agreed. "The Dow Jones newsroom is the most valuable asset that he is acquiring."
“This is a real coup for Rupert Murdoch,” Prof. James Stovall of The University of Tennessee's School of Journalism & Electronic Media said Tuesday. "One thing that Murdoch tends to do is to meld his organizations together to make them not necessarily sing the same song politically but sing from the same page in a business sense. It will be interesting to note the content of The Wall Street Journal over the next few years to see if it covers more Murdoch properties.”
One potential hurdle for Murdoch -- and a possible safeguard for CNBC -- is a content-sharing deal between CNBC and The Journal that doesn't expire until 2012.
But some think Murdoch will get around it. "It doesn't matter," Atorino said. "It won't be a stumbling block."
It's possible the Australian media baron has his eyes on other deals as well. News Corp. could pay all cash for Dow Jones and still have room to buy back shares and make other acquisitions, Standard & Poor's analyst Tuna Amobi said -- which raises questions about a next move.
After News Corp. exchanges its 38% stake in DirecTV Group (DTV, news, msgs) for Liberty Media's (LCAPA, news, msgs) 16% stake in News Corp., Murdoch will own 40% of the voting shares of the company. This exchange "increases the risk that he will do more transactions. He will continue to look at this company in a very entrepreneurial way," Morris said. Morris expects the asset swap to take place in the third quarter.
There had been recent speculation that Yahoo (YHOO, news, msgs) could be the next notch on Murdoch's gun. The mogul had been talking to Yahoo about a possible deal in which News Corp. would exchange its social-networking site, MySpace, for a 25% stake in the search engine.
But such a deal is less likely now that Terry Semel has stepped down as Yahoo CEO. Semel "was enthusiastic" about the idea, Murdoch told Forbes.com before Semel's departure.
For investors, the pricey deal raised questions about whether it was time to load up on News Corp. shares or run screaming for the exits.
Not everyone is sure Dow Jones makes business sense for News Corp. shareholders. It "may be part of his strategy, but it doesn't also mean it's not an ego thing," said Eleanor Bloxham, the founder and president of The Value Alliance, a corporate governance company.
"Whenever you've got a situation where you have a CEO and they're putting themselves out there so much in terms of wanting to do a deal like this, you have to take pause as an investor," Bloxham noted. "In the heat of the moment, it is important to have some rational heads."
Shares of News Corp. have been trading in the $20 range over the past year, well below the stock's 10-year high of $55.62, set in 2000.
Murdoch's offer was both generous and strategic: Although several other parties had considered making an offer for Dow Jones, the price tag prevented anyone from making a serious move.
When Murdoch made his $60 offer, Dow Jones shares had been trading just above $36 per share.
That is still well below the financial media giant's all-time closing high of $76.75, set in June 2000. The stock took a hit during the dot-com bust, after technology companies slashed their advertising budgets, and the stock had struggled before Murdoch came along.
The Dow Jones board of directors met on July 10 with supermarket magnate Ron Burkle and MySpace founder Brad Greenspan, both of whom had separately expressed an interest in the newspaper company. The meetings, an effort to mollify the Bancroft family, were a last-ditch effort by the Bancrofts to find other bidders.
Christopher Bancroft even attempted to accumulate enough voting power himself to prevent a Murdoch takeover.
Last edited by Cougar (2007-07-31 16:40:02)
