Dow deal OK'd; WMG ends EMI bid

Empty

Rupert Murdoch's News Corp. has taken another big step toward a takeover of Dow Jones & Co., while Warner Music Group Corp. has for now abandoned hopes to buy EMI Group Plc.

The Dow Jones board voted late Tuesday to approve an agreement to sell the financial media and information powerhouse to News Corp. for $60 per share. Dow Jones and News Corp. said that their respective boards have agreed that they would enter a definitive sale agreement if the Bancroft family that controls Dow Jones "promptly" puts a "satisfactory" level of support behind such a transaction.

The Bancroft family, which has been split about a sale to Murdoch, could make a decision this week. Earlier Tuesday, a source had said the clan would discuss the suggested deal Thursday. The deal includes safeguards for the editorial independence of Dow Jones' flagship Wall Street Journal.

Meanwhile, WMG said late Tuesday that it has decided not to make a last-minute takeover offer for EMI.

In a statement after the market close, the company didn't provide specific reasons. However, it said that it "reserves the right to announce an offer or possible offer for EMI or make or participate in an offer or possible offer for EMI … within the next six months in circumstances where an announcement is made by or on behalf of EMI or a third party (which for the avoidance of doubt includes Jim Fifield) relating to the making of an offer for EMI by a party other than Maltby Ltd."

Fifield is a former CEO of EMI's recorded music unit who has been mulling a bid, possibly with the backing of financial partners. However, observers have described his chances as an outside shot.

Maltby is an entity created by private-equity firm Terra Firma, which has struck a deal with EMI for a £2.4 billion ($4.9 billion) takeover.

The Takeover Panel, an independent body in the U.K. that supervises acquisitions, previously set a Thursday deadline for any possible counterbids, with only WMG and Fifield seen as possible suitors. Fifield and EMI representatives could not be reached for comment.

WMG in recent weeks has struggled to decide whether the price tag is worth the higher regulatory risk and still make an EMI combination work. Its last offer for EMI was £2.60 per share, compared with Terra Firma's £2.65-a-share deal. Analysts have said that WMG likely would have to offer £2.90-£3 per share to win out.

WMG has seen its stock decline as investors had feared an expensive play for EMI. The stock hit a 52-week low of $13.17 on Tuesday before closing up 2.3% at $13.77. It continued to move higher in after-hours trading.

Sources said that the firm still could look to start talks with Terra Firma as soon as this year to buy EMI's recorded music unit.

A WMG spokesman declined comment on possible future scenarios.

Meanwhile, News Corp.'s takeover bid for Dow Jones appeared headed for the homestretch after the approval by the board.

A Monday lunch between Murdoch and Dow Jones CEO Richard Zannino seemed to have helped smooth out the final wrinkles on an agreement.

Observers have said in recent days that a rival takeover offer from Los Angeles billionaire Ron Burkle and Brad Greenspan, one-time head of the previous parent of News Corp.'s MySpace unit, doesn't look likely to materialize.

That would leave the Bancrofts with three main options: accepting News Corp.'s offer; rejecting it; or rejecting it and having family members sell their stock to Christopher Bancroft, a Dow Jones board member who the Journal said Monday has been trying to block a sale to News Corp. by buying enough super-voting shares from other family members.

Meanwhile, in what industry observers took as the latest sign that the newspaper industry continues its sluggish trends, E.W. Scripps Co. said Tuesday that it will shut down two afternoon newspapers — the Cincinnati Post and the Kentucky Post — by year's end at the conclusion of a joint operating agreement with Gannett Co. Inc.

However, Bank of America analyst Jonathan Jacoby said in a report Tuesday that he expects a Dow Jones deal to create "strategic value/opportunities across multiple business lines" for News Corp. in the longer term.

While others have said that the deal likely will be dilutive, Jacoby argued that it would be accretive on an earnings-per-share basis. "We believe that post the deal, News Corp. will continue its buyback program and, with the Liberty Media swap, could reduce its shares by about 20%-30% over the next 24 months," he said.
comments powered by Disqus