Closing bell rings for Murdoch, Dow Jones

News' $5 bil deal all but final

NEW YORK -- Rupert Murdoch is set to finally get his hands on the Wall Street Journal, which he has long craved, after his News Corp. late Tuesday -- about three months after making its takeover bid public -- reached a definitive agreement to acquire Journal parent Dow Jones & Co. for $60 per share, or about $5 billion.

The News Corp. board approved the acquisition in a meeting Tuesday afternoon, and the Dow Jones board signed off on it Tuesday evening, a source said.

In the final hours before the meetings, Murdoch clinched support from additional members of the Bancroft family that controls 64.2% of the voting power in Dow Jones. Overall, clan members controlling 37.4% of the company's voting power - more than half the Bancroft stake - agreed to the deal, with the rest set to oppose it in a final vote of all shareholders this fall.

Only the Ottaway family that controls a voting stake of about 7% in Dow Jones also has come out in opposition to the deal so far.

Observers said the deal should give News Corp. a very comfortable base of support for the shareholder vote given that investors who don't have family ownership interests to protect will enjoy the big price premium in the deal. One company watcher said the vote will more or less be a technicality. After all, shareholders are getting a 67% price premium over where the stock traded before the Murdoch offer.

The deal isn't expected to face any real regulatory hurdles.

Observers highlighted that Murdoch again showed his ability to pull off big deals with a mix of aggressiveness and charm. While many in the Bancroft family originally seemed concerned about selling what is widely seen as one of the country's best newspapers to a media mogul and his conglomerate, the big price premium and promises to keep the Journal's editorial operations shielded from undue influence won them over.

As investors grew more and more comfortable Tuesday that a deal would be struck, Dow Jones shares rose as high as $58.13 before closing up 11.3% at $57.38. News Corp. voting shares declined 0.8% to $22.66 but rose slightly in after-hours.

Various Wall Street observers have said that the deal might not bring enough in terms of cost savings and new revenue opportunities to pay for itself, instead mainly satisfying the media mogul's long-held appetite for the Journal, which he is expected to give a global growth push and use -- along with other assets -- over time to strengthen his soon-to-launch Fox Business Network.

But with Murdoch having in the past often surprised industry folks with strong deals whose benefits few saw early on, many are looking for signs on how he will put the new assets to use. Murdoch wasn't available for comment on his vision and plans late Tuesday.

The deal is set to boost News Corp.'s U.S. newspaper presence way beyond its current ownership of the New York Post.

The Journal reported Tuesday that Dow Jones negotiated an unusual arrangement that will see it create a fund that would cover advisory fees of $30 million-plus payable to firms advising Bancroft family members, including investment banks and law firms.

That arrangement seems to have won over the support of a Denver branch of the Bancroft family that controls a 9.1% stake in Dow Jones in the 24 hours before the board vote. On Friday, the same branch said it opposed the sale, citing its desire for a higher price tag (HR 7/30).

Most newspaper analysts have lauded the transaction as a one-time chance for Dow Jones to sell at a high price, while some News Corp. watchers have criticized that the deal will increase the conglomerate's exposure to the sluggish newspaper business from about 15% of company revenue to about 20%.

Longtime analyst Laura Martin, founder and CEO of Media Metrics Llc., recently estimated that News Corp. via the deal is destroying 10%-20% of shareholder value by transferring value to Dow Jones (HR 6/27).

Meanwhile, Pali Research analyst Richard Greenfield has been supportive of the Dow Jones acquisition in recent reports, saying "we believe in the strategic merits" and adding the deal is "only slightly dilutive to News Corp. earnings."

He also argued right after the bid became public that "what investors are missing ... is that the acquisition attempt is a sign of just how strong News Corp. management believes their core business is performing."

Banc of America Securities analyst Jonathan Jacoby also has been bullish.

"While some investors had hoped that News Corp. would enter a 'harvest-only' phase, Murdoch continues to look to enhance News Corp.'s portfolio of world-leading assets as he won't sit by patiently as the media world continues to evolve," he recently argued.
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