Shahnaz Mahmud is a freelance journalist based in the US.
Speculation that Rupert Murdoch would prevail in his bid for Dow Jones Company came to a halt after a mere three months, with an outcome that didn't raise too many eyebrows. Shahnaz Mahmud examines the challenges the media mogul faced along the way
It was a battle that pitched a media-shy family against the brash and bold patriarch of a family-owned media giant, but it was no surprise that Rupert Murdoch won out in the end. The relentless media mogul has triumphed in his well-publicised pursuit of the Dow Jones Company, which houses financial newspaper The Wall Street Journal, controlled by the Bancroft family. A definitive agreement was signed on 1 August for around $5.6 billion (€3.9 billion), under the terms of which Dow Jones stockholders will be entitled to $60 in cash for each share of common stock and Class B common stock they own. The merger is expected to close in the fourth quarter, contingent upon approval by Dow Jones stockholders.
To say that the global media executive is well-versed in acquisitions is putting it mildly. He first began to build his empire in Australia in 1953, taking the position of managing director of News Limited. Murdoch expanded in the UK in 1968 with the acquisition of the News of the World, which at that time was the most popular English-language newspaper in the world. He entered US territory in 1973, with the purchase of the San Antonio Express-News, soon launching the tabloid Star Magazine and acquiring the New York Post. Murdoch has since expanded into television, music and online media and further made acquisitions in Asia.
However, Murdoch's path to turning his latest target into a successful venture has been tumultuous at times. Talks of the bid broke two days prior to the announcement of a $17 billion merger between Thomson and Reuters. The 156-year-old independent news service was acquired by the Canadian-based Thomson Corp, which is 70%-owned by the Thomson family. That deal had bearing on the Bancroft family's decision to seriously consider Murdoch's proposal.
The Bancroft family, which has a 64% controlling stake in Dow Jones, has held stewardship of the WSJ since 1902. With the media attention lavished on the Thomson/Reuters merger, industry sources say the family began to assess Murdoch's $60-a-share bid to determine if it would be a compelling opportunity for Dow Jones shareholders.
The main sticking point had been maintaining editorial integrity, particularly for the WSJ, despite the Bancroft's non-active role. Since the end of May, the family had engaged in a dialogue with Murdoch, emphasising its desire to secure editorial independence if the deal were to go through. At the end of June, both sides clashed heavily over the issue, nearly stepping out of negotiations. News Corp had been pushing for a similar structure to the Times of London deal – it is said that Murdoch gave assurances to preserve editorial independence, but subsequently got involved in the paper's direction anyway – but the Bancrofts wanted something stronger.
And, of course, there were external forces seeking to thwart Murdoch from capturing his prize. If the Bancroft family did agree to sell, Murdoch's troubles lay elsewhere. In early June, MySpace founder Brad Greenspan offered a bid to buy 25% of Dow Jones at the same price – $60 a share – as Murdoch, which equates to $1.25 billion for 25%. Around the same time, CEO Brian Tierney of Philadelphia Media Holdings, which owns the Philadelphia Enquirer, Philadelphia Daily News and Philly.com, publicly stated an interest in joining with outside partners to buy Dow Jones.
Nonetheless, with a bit of luck, charm, a lot of money and an I-won't-take-no-for-an-answer gusto, Murdoch landed the company, with promises to preserve editorial integrity. He provided an assurance that News Corp and his family "will be equally strong custodians", according to a press statement.
The Bottom Line
Laura Martin, analyst at Soleil Media Metrics, had been confident from the beginning that the transaction would go through. "The bottom line in the deal for the Bancroft family is money," she says, adding that the family had been pushing to have two seats on the News Corp board of directors. According to the terms of the agreement, they got one for themselves or another mutually acceptable person. Additionally, the parties agreed to establish a five-member, special committee "with the objective of assuring the continued journalistic and editorial integrity and independence of Dow Jones' publications and services".
Martin believes Murdoch had always been willing to sacrifice some editorial control, but the fact that he was willing to pay such a high premium suggests he has big plans for the business. In a statement, Murdoch said: "In combination with News Corporation's assets, the WSJ and the other Dow Jones operations will be even more formidable competitors as we profitably extend their invaluable information across our print, broadcast and digital platforms around the world."
Some believe this is a good move. It is no secret that Murdoch intends to launch a new business channel to compete with CNBC and he requires content to put within the programming. His intention, it seems, is to operate the WSJ as a separate asset to some extent but utilise it in a way to benefit a new venture.
Murdoch's endeavours parallel those of the Thomson family in that he is strategically motivated with expanding his business outside of the US while building a green field business channel. "Murdoch will bring to Dow Jones a strategic vision not been in evidence to date by the Bancroft family," says Martin. "He's a genius and has the luxury of looking at the world in a different way."