Murdoch bid on the ropes


Resistance from members of the Bancroft family to a five billion bucks buyout of Dow Jones & Company by Rupert Murdoch's News Corporation prompted News Corporation to threaten to walk away yesterday. The would-be buyer of Dow Jones and its prized possession, the Wall Street Journal, warned that it would not even seek a full shareholder vote if support from Bancroft heirs amounted to only 28% of the voting power at Dow Jones, as the WSJ reported was the tally several hours before the 5:00 pm ET deadline yesterday.

The Bancrofts, with their super-voting shares, control 64% of the votes at Dow Jones, although they hold only a minority of the equity value. Hours after the deadline, there was no word on a final tally. The board of directors at Dow Jones, which has endorsed the buyout, is expected to hear today what the outcome was.

Meanwhile, there was intrigue within the Bancroft clan. One heir who opposed the sale reportedly resigned as a trustee of one family trust, for fear of being sued by relatives who support the sale. Since the Bancrofts are deeply divided over the sale, there is the possibility that some heirs who are not trustees will sue their relatives who are for breech of their fiduciary duties if they refuse to vote for the sale at 60 bucks per share, which was a huge premium over the Dow Jones stock price in the 30s at the time Murdoch made his bid. With fears that Murdoch might walk away, Dow Jones stock fell more than 5% yesterday to close at 51.56.

SmartMedia observation: We would hate to be a Dow Jones & Company director at the next shareholders meeting if the Murdoch bid is spurned. And we doubt that anyone else would relish a seat on that board, so we would not be surprised to see a mass exodus of the independent directors who voted for the sale and have nothing to gain by staying on to be in the middle of a feud that pits various factions of the Bancroft family against each other and the entire family against virtually all other shareholders – the people who actually own the majority of the company. That is, if the five billion bucks buyout is turned down. There is no other bidder waiting in the wings – at least, not at any price approaching 60 bucks a share. But to stay put and try to grow the company – something the Bancrofts haven't had much commitment to for at least a generation – Dow Jones will have to cut its dividend drastically and start reinvesting in itself – a move that will hurt the Bancrofts deeply in their own wallets and make the family feud even hotter.