News Corp Triggers Bidding War for Dow Jones

Discussion in 'Wall St. News' started by WallstYouth, May 3, 2007.

  1. May 2 (Bloomberg) -- Dow Jones & Co. shareholders say Rupert Murdoch's $5 billion takeover bid will spark an auction of the 125-year-old newspaper publisher.

    ``We're in the first inning,'' said Lawrence J. Haverty Jr., associate portfolio manager at Gamco Investors Inc. in Rye, New York. Gamco had 825,000 Dow Jones shares as of December. ``Dow Jones is a fish in the pond, and there are sharks swimming around.''

    Murdoch's News Corp. yesterday offered $60 a share for Dow Jones, owner of the Wall Street Journal, Barron's and Dow Jones Newswires. The bid, 65 percent above the previous day's close, was rejected by Bancroft family members who control more than 50 percent of the voting power at the New York-based publisher.

    News Corp. may have opened the door for other bidders, including General Electric Co., owner of the CNBC news network, Haverty said. Washington Post Co., Gannett Co. and even Google Inc. may be interested, said Michael Chren, managing director of Allegiant Asset Management Co. in Palm Beach Gardens, Florida.

    Reuters Group Plc, the world's largest publicly traded provider of financial data, would be interested in some Dow Jones assets, the Wall Street Journal reported, citing a person familiar with the matter.

    ``This is a trophy,'' said fund manager Michael Price, whose MFP Investors LLC in Short Hills, New Jersey, manages about $2 billion and owned 351,000 Dow Jones shares as of Dec. 31. ``This could be a $100 deal.''

    `Big, Generous'

    Dow Jones shares fell 20 cents to $56 at 4 p.m. in New York Stock Exchange composite trading, after surging 55 percent yesterday. Class A shares of New York-based News Corp., owner of Fox News, Fox Television and Twentieth Century Fox, rose 14 cents to $21.59.

    GE, based in Fairfield, Connecticut, isn't interested in buying Dow Jones, Chief Executive Officer Jeffrey Immelt said yesterday in a brief interview in Boston. Washington Post Chief Financial Officer John Morse wouldn't comment. Jon Murchinson, spokesman for Mountain View, California-based Google, declined to comment, as did Tara Connell, spokeswoman for McLean, Virginia-based Gannett.

    ``This is a big, generous offer,'' Murdoch, 76, said in an interview on his Fox News Channel yesterday. The bid is too high for private-equity buyers, he said.

    Family Decision

    Murdoch, who described the Bancrofts as ``great guardians'' of the Wall Street Journal, said he planned to meet with the family within weeks.

    Bancroft family members will dictate any sale. They control about 64 percent of the voting power through Class A and Class B shares, while owning about 25 percent of the company, and indicated a majority opposes Murdoch.

    Family members ``will vote shares constituting slightly more than 50 percent of the outstanding voting power of Dow Jones'' against Murdoch's bid, Dow Jones said yesterday in a statement. That's at least 78 percent of the voting power that is in the hands of the family, which has controlled the newspaper since 1902.

    The statement indicated some family members are willing to sell, a division that means a transaction remains possible, said Brendan Buckley, an analyst at Fitch Ratings in New York.

    ``They're very fragmented,'' Buckley said. ``I definitely do believe that they're going to weigh every bid very seriously.''

    Bancroft Stake

    News Corp.'s bid values the Bancroft family's stake at about $1.23 billion. Christopher Bancroft and cousins Elizabeth Steele and Leslie Hill, a retired airline pilot, are on the board. Bancroft and Steele didn't return calls seeking comment.

    Bloomberg LP may also be interested, said Peter Kreisky, president of Kreisky Media Consultancy in New York.

    ``We haven't made a bid and we don't plan to,'' said Judith Czelusniak, a spokeswoman for New York-based Bloomberg LP, owner of Bloomberg News. Bloomberg competes with Dow Jones in providing financial news and information.

    Murdoch's offer represents about 17 times Dow Jones's projected 2007 profit, based on estimates by Prudential Equity Group analyst Steven Barlow in New York. Newspapers have been selling at 10 times to 11 times earnings, Barlow said. Sam Zell's proposed acquisition of Chicago-based Tribune Co. was at 10 times projected 2007 earnings.

    `So Attractive'

    ``There are a lot of entities that would like to own Dow Jones, the question is at what price,'' said Allegiant Asset's Chren, whose firm owns about 750,000 shares. ``It's pretty clear the board doesn't want to sell to Murdoch. Their problem is that Murdoch's bid is so attractive from a valuation perspective that it will be difficult for anyone else to pay $60 a share.''

    Murdoch has long coveted Dow Jones, whose Wall Street Journal is the second-biggest selling newspaper in the U.S. behind Gannett's USA Today. Murdoch yesterday described the Journal as ``the greatest newspaper in America.''

    Dow Jones's business media assets would dovetail with News Corp.'s Fox Business News channel, which is scheduled to start broadcasting later this year. News Corp. also publishes 170 newspapers including The Times of London and the New York Post.

    Dow Jones Chief Executive Officer Richard Zannino has been expanding the company beyond newspapers to overcome a decline in advertising revenue. He said last month that Dow Jones plans to increase the share of revenue it generates online to 50 percent of the total by 2009 from 30 percent.

    In December, Dow Jones bought out the 50 percent stake in Factiva held by Reuters Group Plc, gaining full ownership of the online news database. Dow Jones also owns the online financial Web site MarketWatch.

    By comparison, about 10 percent of New York Times Co. revenue comes from non-newspaper assets.

    ``The Journal and MarketWatch are great and undervalued properties,'' Chren said.

    Zannino's Role

    Under Zannino, who took over in February 2006, Dow Jones began publishing a weekend edition of the Journal, started selling advertisements on the newspaper's front page and narrowed the width of the publication to save more than $20 million this year. On April 17, Dow Jones posted first-quarter profit that fell less than analysts' estimated, sending the shares to their biggest gain this year.

    ``It's been a very impressive turnaround at Dow Jones,'' said Bear Stearns analyst Alexia Quadrani, who has a ``market underweight'' rating on the shares and forecasts revenue will grow 17 percent this year.

    The Bancrofts risk investor ire by rejecting Murdoch's offer in favor of family stewardship, shareholders said.

    The family ``legally can say no,'' said Jean-Marie Eveillard, portfolio manager at First Eagle Global Fund, which manages assets of $21 billion including almost 1.7 million Dow Jones Class B shares. ``Although the furor in the media and among investors would be quite something to behold.''
  2. This headline should read "News Corp Sparks Insider Trading Bonanza in Dow Jones Options/Stock"

    Seems like everyone and their mother was buying upside calls in Dow Jones the week before the bid was announced. Nice information control, Mr. Murdoch...