Bancrofts to Meet with Murdoch

In a dramatic shift in the Dow Jones saga, representatives of the Bancroft family will meet with Murdoch's News Corp. to discuss the $5 billion offer that is on the table for the company. They made clear in their statement that they are open to other offers:

"As we have been since 1902, the Bancroft Family remains resolute in its commitment to preserve and protect the editorial independence and integrity of The Wall Street Journal, as well as the leadership, strength and vitality of The Journal and all of the other publications and services of Dow Jones.

"Since first receiving the News Corporation proposal, the Family has carefully considered and discussed among ourselves and with our advisors how best to achieve that overarching objective, while serving the best interests of the Company's various constituencies.

"After a detailed review of the business of Dow Jones and the evolving competitive environment in which it operates, the Family has reached consensus that the mission of Dow Jones may be better accomplished in combination or collaboration with another organization, which may include News Corporation.

"Accordingly, the Family has advised the Company's Board that it intends to meet with News Corporation to determine whether, in the context of the current or any modified News Corporation proposal, it will be possible to ensure the level of commitment to editorial independence, integrity and journalistic freedom that is the hallmark of Dow Jones.

"The Family also indicated its receptivity to other options that might achieve the same overarching objective."

New York Times: "Bancroft Family Agrees to Meet with Murdoch"

The Friday Roundup

I have far too much to write about today. So instead of boring you, I encourage you to browse through the articles listed below and click on what interests you:

Hedge Funds

1. Applied Quantitative Research (AQR) is rumored to be considering a public offering. I intend to write a full blog post on what this means for investors so stay tuned.
   
2. UBS is closing its 2 year old hedge fund because of sub-par returns resulting from subprime exposure.
3. Tobias Adrian, an economist at the New York Fed, alluded to LTCM in his analysis of systemic risks in the hedge fund industry. Is more regulation on the horizon?
   
4. An event that should help soften the hedge fund industry's image - the Robin Hood benefit - went off without a hitch. (unfortunately it sounds more like a gaudy display of wealth than a charity benefit)
   

Private Equity

1. The Senate just can't let go of the "carried interest" issue. They see the money PE firms and Hedge Funds are making and they see an easy cure to their budget/AMT issues.
2. Cablevision accepted a big $10.6 billion buyout bid from the Dolan Family.
   

Economy/Fed

1. GDP growth fell to 1.3% in the 1Q2007, below the 1.8% estimate and well below the 2.5% rate of growth in 4Q2006.
   
2. Core Inflation (inflation ex-inflation) for March came in at 2.1% which was a comforting number, though still above the 2% Fed comfort level. CPI data is due out May 15th (expect this to be higher).
   
3. U.S. job growth slowed in April. The unemployment rate rose from 4.4% to 4.5% which should help the Fed leave the fed funds rate stable at 5.25%.
   

Mergers & Acquisitions

1. The Dow Jones drama continues: the Bancroft family is probably a little nervous about what Murdoch will do to their beloved Journal (see below, click to enlarge):
   
2. 
3. Another Huuuge Media deal is "unofficially" in the works: Reuters confirmed they have been approached.
   
4. The New York Post reported that Microsoft is looking at Yahoo! as a potential acquisition target. I don't know how much weight I'd put on this one.
   

Real Estate

1. Goldman Sachs thinks California home prices will weaken further.
2. Some people want to remove housing from GDP. Caroline Baum thinks that is ridiculous.
3. Piggington reminds us why following the Median home price can be a faulty indicator. Rich and I prefer the Case-Shiller Indices.
4. Yet another journalist has come out and "called the bottom" in the housing market. I think articles like this are almost criminal. If people rely on faulty information to make a home purchase they could do a lot of damage to themselves financially before all is said and done. Check out the graph below and let me know if you agree with me that such a call may be a bit immature (click to enlarge):

Bancroft Family Is Holding Out

This afternoon Michael Elefante (pictured, right), a Dow Jones board member and representative of the Bancroft Family Trust, announced that the Bancroft family intends to turn down Rupert Murdoch's $5 billion offer for Dow Jones. This was the move that I anticipated. Any good fiduciary would have told the family to hold out for a better offer. It is my personal belief that the family members are surely aware that if they play their cards right they could get a 20-25% premium on the current offer before all is said and done.

Remember, the Bancroft voting shares are not consolidated into 1 or 2 hands. It is estimated that roughly 20 family members control a significant percentage of voting shares. Though they control 65 % of the company, currently shares representing "slightly more than 50% of the outstanding voting power" will vote against the sale. In other words, even at $5 billion the Bancroft family isn't voting all together. If the right price is reached enough family members will agree, and Dow Jones will be sold. This, if anything is encouraging news for News Corp.

The article I read over at Dealbook mentions the potential for a sweetened News Corp. offer. I think they probably will lob another offer up to the plate, I just don't think they will be the only ones.