Will Rupert Murdoch Finally Get Dow Jones?

After a seemingly interminable wait News Corp. finally offered an unsolicited bid for Dow Jones (DJ), the proud owner of the Wall Street Journal, Barron's, Dow Jones Newswires and MarketWatch.com. The bid, which at $60/share represents a 65% premium to DJ's closing price, led some analysts to call it "rich." While $5 billion is no small offer it may not actually be enough to buy DJ.

To be perfectly honest, though this deal has been rumored for years I originally did not have DJ on my short list of potential takeover targets. I left DJ off largely because Rupert Murdoch has been sniffing around DJ for years and never decided to make an offer. The reason? In order to buy Dow Jones one must essentially get the consent of the Bancroft family. The Bancroft family controls between 60 and 65% of the company. They accomplish this through a dual-share structure, Class A common and Class B voting shares. The family controls roughly 15% of the common and 75% of the Class B shares. The company doesn't exercise their influence quietly either. Of the 14 directors on Dow Jones' board 4 have direct ties to the family and it is assumed that a fair share of the other 10 are sympathetic to the family. Family control over the board may partially explain the miserable performance of DJ stock over the past 10 years; before Murdoch's bid DJ still traded 15% below its stock price from 1997.

The Bancroft family will be reluctant sellers and it is likely they will hold out for a bidding war before they agree to a sale. Now that the company is "in play" it should enjoy plenty of suitors. The Times, the Washington Post and Bloomberg are all listed as potential buyers, though I feel the company is ripe to be taken private. With so many private equity firms sitting on billions of dry powder (Carlyle, Goldman, Blackstone etc.) it would seem unlikely that one of them wouldn't take a stab at DJ. I haven't done thorough due diligence but I would imagine, given the company's sloppy acquisition track record and poor leadership, that somewhere in the $1.8 billion of revenue there is some fat to trim and underneath that some unlocked value. Look for news of a competing bid by early next week. If we don't see a bid it will mean Murdoch was further along than we all thought when DJ released it over the wire.