News Corporation sells Dow Jones Indexes


Dow Jones & Company announced a deal with CME Group to form a joint venture to operate a global financial index services business. In short, Dow Jones, owned by News Corporation, will be paid $607.5 million for 90% of the Dow Jones Indexes business.

It appears the complicated deal is designed to avoid any tax bite for News Corp. The definitive agreement provides for CME Group to own 90% of the venture to which Dow Jones will contribute its Dow Jones Indexes business valued at $675 million. Dow Jones will hold the remaining 10% and retain a key role in the management of the Dow Jones Industrial Average. CME Group will contribute a business which provides certain market data services valued at $607.5 million to the joint venture. The new joint venture will also raise approximately $613 million in third-party debt which will be used to pay a $607.5 million distribution to Dow Jones.

“A venture with CME Group provides advantages the index business needs to grow and prosper, This affords Dow Jones the opportunity to tighten its focus on its news and business information products while preserving and protecting an iconic business brand,” said Les Hinton, CEO of Dow Jones.

Taken together, the distribution received from the joint venture with CME Group and the previously announced sale of the company’s interest in STOXX Ltd. represent nearly $1 billion in proceeds to Dow Jones.

Terms of the latest agreement provide for the joint venture to license the Dow Jones name for the financial-index business on a long-term basis. Ownership of the Dow Jones brand, including trademarked names, remains with Dow Jones.

This transaction, which is subject to regulatory approvals and other customary closing conditions, is scheduled for completion in the 2010 first quarter.

Some history:

Created in 1896 by Charles Dow, one of the founders of Dow Jones, the Dow Jones Industrial Average originally had 12 stocks, including a leather maker, a steel provider and a sugar producer. The industrial average was first published in the Wall Street Journal on May 26, 1896, but wasn’t regularly featured in the paper until October of that year. The Dow Jones Industrial Average became a household name after the stock market crash of 1929 when people beyond Wall Street began taking an active interest in the status of the market.

The first index from Dow Jones debuted in 1884 at a time when railroads dominated the economy. That predecessor of what is today the Dow Jones Transportation Average was originally named the Dow Jones Railroad Average.

Dow Jones first commercialized its indexes in 1997. Those initial licensing efforts led to the creation of the Dow Jones Indexes business.