Murdoch's bold bid for the Journal

News Corp.'s $5 billion offer for Dow Jones seems rich but the controlling Bancroft family is balking at the deal. Any other suitors?

By Paul R. La Monica, editor at large

NEW YORK ( -- News Corp. has made an unsolicited $5 billion bid to buy Dow Jones & Co. - an offer that could prove tough for the Bancroft family that controls the publisher of The Wall Street Journal to turn down, industry analysts said Tuesday.

Nonetheless, some members of the family indicated late Tuesday that they would, in fact, oppose the deal, raising the possibility that other companies could bid for Dow Jones.

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Dow Jones (Charts) said Tuesday morning that News Corp (Charts, Fortune 500). - Rupert Murdoch's media empire that includes The New York Post, the Fox TV and movie business, and MySpace - has offered $60 a share for Dow Jones, a 65 percent premium to Dow Jones' closing price as of April 30.

"The Board of Directors and members and trustees of the Bancroft family, who hold shares representing a majority of the Company's voting power, are evaluating the proposal. There can be no assurance that this evaluation will lead to any transaction," Dow Jones said in a two-paragraph statement.

But later Tuesday, Dow Jones released another statement saying that Michael Elefante, a company director and Bancroft family representative, told the board that "members of the family and the trustees of trusts for their benefit have advised him that they will vote shares constituting slightly more than 50% of the outstanding voting power" of Dow Jones against the deal.

Dow Jones said its board would factor this into its review of News Corp.'s bid.

Officials at News Corp. confirmed the bid, saying in a statement that it was a "friendly" offer. The offer values New York-based Dow Jones at about $5 billion.

Shares of Dow Jones surged 57 percent after news of the bid was first reported on TV network CNBC while News Corp.'s stock fell nearly 3 percent.

"This bid has such a premium that the trustees can't ignore it," said Edward Atorino, an analyst with The Benchmark Co., an independent research firm.

Larry Grimes, president of W.B. Grimes, an investment bank based in Gaithersburg, Md., that focuses on media mergers, added that he thinks the Bancroft family may be amenable to a deal.

"It's time for the Bancrofts to exit. This seems like perfect timing. It comes at a time when Dow Jones has done a great job executing with The Wall Street Journal. All cylinders are firing there," Grimes said.

In addition to the Journal, Dow Jones publishes the widely watched Dow Jones industrial average and owns the weekly financial publication Barron's, the Web site and Dow Jones Newswire services.

Shares of other newspaper publishers, including The New York Times Co (Charts)., Gannett (Charts, Fortune 500), McClatchy (Charts) and Lee Enterprises (Charts) all shot up Tuesday on the news of the Dow Jones offer.

But analysts weren't sure that a deal would spark more consolidation in the newspaper business, even though real estate mogul Sam Zell agreed to take Tribune & Co (Charts, Fortune 500). private last month.

Benchmark's Atorino said Tuesday's rise in other newspaper stocks may be an example of short sellers, investors who bet a stock will go down, covering their positions in order to avoid losses since newspaper stocks are rallying on the takeover speculation. He is not predicting a wave of deals though.

Grimes agreed. He said a News Corp. purchase of Dow Jones is a unique situation since he thinks Murdoch is mainly interested in the Journal - especially since News Corp. has announced plans to launch a business news channel to rival CNBC.

"For Murdoch, this is an opportunity to develop an even greater worldwide brand. It just makes perfect sense," Grimes said.

Several analysts said Dow Jones may now have no choice but to sell the company given how much the stock surged on Tuesday. If the company decided to go it alone, it's likely the stock would tumble back to the mid-$30s, where they were before News Corp. announced its bid.

But will Dow Jones accept Murdoch's offer or look for a white knight bid?

Barry Ritholtz, chief market strategist with research firm Ritholtz Research and Analytics, said he felt that GE, which owns CNBC with Dow Jones, might want to buy Dow Jones to prevent News Corp. from acquiring it.

He added that GE could then spin-off the struggling NBC Universal unit, a move that some analysts and institutional investors have been urging the company to make.

"If GE bought Dow Jones, they could then spin out their entire media group as NBC Universal at a higher valuation" he said, noting the New York Times and Washington Post Co. may also want to consider bidding for Dow Jones.

Another company mentioned as a potential suitor, privately held Bloomberg LP, already has denied it's interested in Dow Jones, according to a report from Reuters.

But the Bancroft family is likely to face opposition to the News Corp. bid from many of its employees, who would prefer that Dow Jones remain independent. The Independent Association of Publishers' Employees, a union that represents workers of Dow Jones, said they are against a takeover by News Corp.

"The staff, from top to bottom, opposes a Rupert Murdoch takeover of Dow Jones & Co. Since the early part of the twentieth century, the Bancroft family has stood up for the independence and quality of The Wall Street Journal and has built it into one of the world's great newspapers," the union said in a statement.

The union added that it felt Murdoch "has shown a willingness to crush quality and independence" and that "the massive premium Mr. Murdoch is offering suggests only one recourse to make the acquisition profitable: gutting the enterprise and slashing the staff that make it the leading financial news organization."

Still, others don't expect a counteroffer by GE or other newspaper publishers. Newspaper publishers have struggled in recent years as more and more readers and advertisers have flocked to the Internet. That's led to declines in circulation and advertising revenue for many newspaper companies.

"Not that many companies are out there with grandiose plans for business news even though GE could do this as a defensive move," said Robbert Van Batenburg, head of global research for Louis Capital Markets, an institutional broker.

"But the fundamentals in the newspaper business, for the lack of a better word, are bad and the valuations are still high. This is not a sign of more consolidation. Look it how long it took Tribune to sell," Van Batenburg added, referring to the fact that Tribune finally agreed to a deal with Zell in April for only a small premium after putting itself up for sale last September.

Several newspaper companies have also come under pressure from large shareholders to boost returns and change their corporate governance practices.

Morgan Stanley, for example, has urged the company that owns The New York Times to get rid of the two classes of stock owned by members of the Ochs-Sulzberger family that allow the Sulzbergers to have voting control over The New York Times Co., much like the Bancrofts have control over Dow Jones.

At last week's Times shareholder meeting, investors approved the company's slate of directors but more than 42 percent of shares were withheld as a sign of protest against the company's management. Top of page