Will $uitor New$ Corp. Win Over Dow Jones' Bancrofts?

Discussion in 'Wall St. News' started by biggerfish, May 2, 2007.

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    Dow Jones: the Premium Question
    Murdoch's Lofty Offer Could Deter Rivals; Buffett Unlikely to Bid

    Dow Jones long has traded at a premium relative to other newspaper companies. The question, after Rupert Murdoch's audacious bid for the parent of The Wall Street Journal, is how much is a buyer willing to pay for what now is viewed as one of the media world's high-profile prizes?

    News Corp., the international media conglomerate controlled by Mr. Murdoch, made an unsolicited $5 billion buyout offer for Dow Jones, sending shares of the New York media company up $19.87, or 55%, to $56.20 in 4 p.m. composite trading on the New York Stock Exchange, and lifting the stocks of other newspaper companies. (See a chart of newspaper stocks' jumps.1)

    News Corp. said the offer was "friendly," calling the Journal "one of the world's great newspapers." But the Bancroft family, Dow Jones's controlling shareholders, told the board they would vote shares constituting slightly more than 50% of the voting power outstanding against the $60-a-share offer.

    The offer represented a lofty multiple, equal to nearly 40 times the media company's 2007 projected earnings -- higher than Google's forward price-to-earnings multiple of 31. Even before the offer, Dow Jones traded at a 20% to 30% premium above other newspapers.

    The offer is 65% above the close of Dow Jones shares Monday, and more than 80% above its 52-week low, reached in September. The stock closed at its highest level in five years yesterday, on its biggest share-volume day in at least 30 years. The shares are still more than $20 below their record close in June 2000.

    DOW (JONES) RALLY [Tuesday, May 1, 2007]
    Key facts about one of the biggest days in history for shares of Dow Jones & Co.:
    • Closed at five-year high of $56.20, up $19.87, or 55% .
    • Intraday high of $58.47 was the best since April 10, 2002.
    • The $19.87 gain added $1.66 billion in market capitalization.
    • DJ is still off $20-plus from its record of $76.75 in June 2000.
    • Meanwhile, News Corp. Class A shares fell 4.21% -- a loss in market value of $3 billion
    (roughly what all of DJ was valued at as of Monday).

    Source: WSJ Market Data Group

    The offer's premium raises the question of whether Mr. Murdoch views Dow Jones as a trophy property that would cap decades of media deal making. If so, the deal would be more akin to high-price acquisitions of sports teams and skyscrapers. That would also mean few other bidders might challenge him, leaving the Bancroft family as his only hurdle.

    But even if Mr. Murdoch views Dow Jones as a trophy, there are strategic reasons for him to do the deal. Dow Jones's content and brands could help him build a global business brand, which would include the soon-to-be-launched Fox business news channel, which could benefit from an alliance with The Wall Street Journal. The Journal currently has an alliance with CNBC. Mr. Murdoch could also sell the company's content through his media empire.

    "He has a history of identifying assets that he really likes and that make strategic sense, and paying what is necessary to win," says Mark Gallogly, founding partner of Centerbridge Partners LP, whose background is in media businesses.

    If, on the other hand, other potential buyers can see ways to justify the price, either through synergies, cost-cutting or the view that Dow Jones is worth roughly double what stock investors were willing to pay the day before the offer, then a bidding war could ensue. The emergence of wealthy bidders such as Sam Zell and David Geffen for Tribune Co. shows the appeal of newspapers to wealthy individuals.

    Shares of Dow Jones generally have traded at higher multiples than peers in recent years, in part because the company has less exposure to newspapers than some rivals do. About 60% of Dow Jones's revenue this year is expected to come from print publications, according to analysts. New York Times Co. is expected to see more than 90% of its revenue from print, after recently selling its broadcast-television unit.

    At the same time, The Wall Street Journal is holding up better than many other papers, has a coveted demographic, high advertising rates, a respected brand and a growing online franchise that charges for subscribers, unlike most others.

    The Journal itself has bucked the declining circulation trends that have hurt other newspapers. For the six months ended March 31, the Journal's circulation was up slightly, versus a 2.1% decline for newspapers overall. The Journal's Web site, the largest subscription news site on the Internet, has grown strongly, with paid subscriptions rising 20% in the first quarter to 931,000. Analysts expect Dow Jones to earn $1.51 a share this year and $1.80 next year, up from $1.11 in 2006.

    'Unique Property'
    "The company has become far more oriented toward improving profitability without sacrificing the editorial integrity," says David Wallack, a portfolio manager at T. Rowe Price Associates, which is the largest outside shareholder of Dow Jones stock with 9.5 million shares, according to LionShares. He says Dow Jones is "a highly cash-generative company, its balance sheet is in good shape, and it's a unique property."

    continued below:
  2. ... continued:

    News Corp.'s move could spark competing offers from media titans such as Washington Post Co., New York Times and Bloomberg LP, some analysts suggest. The company's flagship Wall Street Journal is the second-largest U.S. daily, after Gannett Co.'s USA Today. The Journal's circulation is 2.06 million.

    Other newspaper companies have recently spurred bidding wars when they put themselves up for sale amid pressure from shareholders. Tribune Co. agreed to be taken private in an $8.2 billion buyout backed by real-estate investor Mr. Zell at a multiple of roughly 10.4 times its projected 2007 earnings before taxes interest and depreciation. Knight Ridder Inc. was bought by McClatchy Co. in a recent transaction.

    Despite the Bancrofts' initial opposition to the offer, analysts argue it will be tough for the family to resist such a high premium.

    "While we do not believe the family was looking to sell the company, and does have concerns about maintaining journalistic integrity, this offer may be hard to refuse," says Alexia Quadrani, an analyst at Bear Stearns, who has a "peer perform" rating on the stock, the equivalent of a hold. "This is such a rich valuation."

    One sign that the market thinks the deal could go through: News Corp. shares fell $1.01, or 4.2%, to $22.99 on the NYSE yesterday.

    When companies make expensive acquisitions, their shares typically fall, as investors worry that earnings will be affected. News Corp. shares have climbed sharply in the past year, in part because the company has resisted expensive acquisitions and focused on its growing global assets. The unsolicited proposal from News Corp. was in cash, or a combination of cash and shares, another sign of the eagerness of Mr. Murdoch to make the deal happen.

    Now, the question is whether Mr. Murdoch has managed to chase away competing bidders with his high bid. Even some private-equity players say the bid is too high for their taste.

    "It would surprise me if private equity came in on its own," says Norman Pearlstine, a former managing editor of The Wall Street Journal and now a senior adviser at Carlyle Group, a large private-equity firm.

    Typically, private-equity firms pay a premium for a public company that is anywhere from 20% to 30%. But Mr. Murdoch's bid, at a 65% premium, is way beyond normal territory.

    Whether other media buyers will be dissuaded by the high bid is unclear. Washington Post has been rumored to be a potential buyer ever since the publication of a 2003 article in the New Yorker magazine, in which William Cox III, one of the Bancroft family members, said the family would be open to a deal with the Post, particularly given its ties to billionaire investor Warren Buffett of Berkshire Hathaway Inc., a longtime Post shareholder and a director on its board. Rima Calderon, a spokeswoman for the Post, declined to comment.

    Catherine Mathis, a spokeswoman for New York Times Co., declined to comment, but people familiar with the company's thinking said it would be unlikely to make an overture to Dow Jones, given its battle with its own shareholders.

    At Bloomberg, "there are no current or pending talks," said Judith Czelusniak, spokeswoman for the private financial-news firm founded by New York City Mayor Michael Bloomberg. Mr. Bloomberg approached Dow Jones in the mid-1990s to combine the two companies, but was rebuffed by the board.

    If Dow Jones were sold, Reuters Group PLC would be interested in buying some of the company's assets, a person familiar with the matter said. These would include Dow Jones Newswires and Dow Jones Indexes, which calculates the Dow Jones Industrial Average and many other market indicators.

    Buffett's Caution
    Mr. Buffett is an unlikely bidder, given the richness of the bid. Also, Mr. Buffett's experience with the Washington Post board and the Buffalo News -- a Berkshire subsidiary -- provides him with a dim outlook on the industry. In his March 1 annual letter, he compared nonstrategic buyers of newspapers with buyers of major sports franchises.

    "Aspiring press lords should be careful," he wrote. "There's no rule that says a newspaper's revenues can't fall below its expenses and that losses can't mushroom." As the importance of newspapers diminishes, he added, "the 'psychic' value of possessing one will wane, whereas owning a sports franchise will likely retain its cachet."

    --Tom Lauricella, Matthew Karnitschnig, Aaron O. Patrick and Henny Sender contributed to this article.

    Write to Susan Pulliam at susan.pulliam@wsj.com13, Gregory Zuckerman at gregory.zuckerman@wsj.com14 and Karen Richardson at karen.richardson@wsj.com15


    RELATED COVERAGE [see WSJ Hyperlinks below]
    • Surprise Bid by News Corp. Could Put Dow Jones in Play2
    • Key to Company's Fate Is the Bancroft Family3
    • Bid Shows Murdoch Hasn't Lost Taste for Print4
    • Transcript: Murdoch interview on Fox News Channel5
    • Deal Journal: Sizing Up Possible Suitors6
    • Washington Wire: Murdoch on the Politics7
    • Read statements from Dow Jones and News Corp.8
    • Journal Names Brauchli Managing Editor9
    • Dow Jones Taps Richard Zannino as CEO10
    • Dow Jones Turned Down Approach From New York Times11
    • GE Eyes Dow Jones, New Yorker Reports12

    URL for this article:

    Hyperlinks in this Article:
    (1) http://online.wsj.com/public/quotes/main.html?symbol=dj+nyt+wpo+blc+gci+jrc+mni+&type=usstock+usfund
    (2) http://online.wsj.com/article/SB117803255991188252.html
    (3) http://online.wsj.com/article/SB117806374494188888.html
    (4) http://online.wsj.com/article/SB117806470417888917.html
    (5) http://online.wsj.com/article/SB117805489799288682.html
    (6) http://blogs.wsj.com/deals/2007/05/01/sizing-up-possible-rival-dow-jones-suitors/
    (7) http://blogs.wsj.com/washwire/2007/05/01/no-bloomberg-challenge-for-dow-jones/
    (8) http://online.wsj.com/article/SB117803330235488273.html
    (9) http://online.wsj.com/article/SB117692395703074442.html
    (10) http://online.wsj.com/article/SB113630505283036553.html
    (11) http://online.wsj.com/article/SB106721485382148300.html
    (12) http://online.wsj.com/article/SB857355461867028000.html
    (13) mailto:susan.pulliam@wsj.com
    (14) mailto:gregory.zuckerman@wsj.com
    (15) mailto:karen.richardson@wsj.com
  3. Murdoch Left to Woo Bancrofts; Dow Jones Doesn't Act (Update2)

    By Andy Fixmer

    May 3 (Bloomberg) -- Dow Jones & Co.'s refusal to act on News Corp.'s $5 billion takeover bid leaves Rupert Murdoch with the task of convincing members of the company's controlling Bancroft family to sell.

    ``This throws the ball back to Murdoch,'' said Ed Atorino, a New York-based analyst with Benchmark Co. ``Murdoch will probably raise his bid and deal with the family.''

    Dow Jones, owner of the Wall Street Journal, said yesterday its board won't act on News Corp.'s offer because the Bancroft family opposes the bid. Family members who control 52 percent of the voting power are against the bid, New York-based Dow Jones said yesterday in a statement.

    ``The board didn't say no,'' Atorino said. ``They said raise your bid and convince 2 percent of the family to go your way.'' Atorino rates the shares ``hold'' and doesn't own them. The Bancroft family members with 52 percent of voting power are a ``small majority,'' he said.

    Michael B. Elefante, a director who represents the Bancrofts, informed the board about their decision. Murdoch told Fox News on May 1 that he plans to meet with family members in coming weeks to discuss his $60-a-share offer.

    Dow Jones shares rose 30 cents to $56.30 at 9:40 a.m. in New York Stock Exchange composite trading. They surged 55 percent on May 1, when the bid was made public. Class A shares of New York- based News Corp., owner of Fox News, Fox Television and Twentieth Century Fox, rose 11 cents to $21.70.

    News Corp.'s offer for Dow Jones, which also owns Barron's and Dow Jones Newswires, was 65 percent above the previous day's closing stock price. Bancroft family members who control more than 50 percent of the voting power rejected the offer shortly after it became public.

    Voting Power
    The Bancrofts hold about 64 percent of the voting power at Dow Jones through Class A and Class B shares, while owning about 25 percent of the company. The family has controlled the newspaper since 1902.

    News Corp.'s bid values the Bancroft stake at about $1.23 billion. Christopher Bancroft and cousins Elizabeth Steele and Leslie Hill, a retired airline pilot, are on the board.

    The Bancrofts may approach Thomson Corp., Reuters Plc and Yahoo! Inc. to gauge their interest in buying the family's stake, The Business reported on its Web site.

    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.

    Bloomberg News parent Bloomberg LP competes with Dow Jones in providing financial news and information.

    `Greatest Newspaper'
    Murdoch has long coveted Dow Jones, whose Wall Street Journal is the second-biggest selling newspaper in the U.S. behind Gannett Co.'s USA Today. Murdoch this week 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.

    To contact the reporter on this story: Andy Fixmer in Los Angeles at afuxmer@bloomberg.net

    Last Updated: May 3, 2007 09:44 EDT
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    Wall Street Journal weighs life under Murdoch
    By Richard Siklos, Wednesday, May 2, 2007

    Rupert Murdoch has spent years thinking about what he would do with The Wall Street Journal if he could just get his hands on it. Based on his business history, he often gets what he wants.

    But Murdoch, the media baron who runs the News Corporation, may need a little more of his trademark patience to win The Journal's parent company, Dow Jones & Company.

    Wednesday, the company's board announced that it was taking no action on Murdoch's surprise $5 billion bid because members of the controlling Bancroft family holding 52 percent of the company's votes oppose it.

    Murdoch's determination to buy Dow Jones is not expected to be deflected by the news
    , according to an adviser who did not want to be identified because he was not authorized to speak for Murdoch. The News Corporation declined to comment.

    The question for Bancroft family members, journalists and competitors would be, if he eventually prevails: What sort of owner would Murdoch be for the world's leading financial newspaper? A look at the five decades he has spent buying, running and selling newspapers suggests two things.

    First, Murdoch does not mind losing money in the short term to satisfy his competitive goals. And despite overseeing a globe-spanning media conglomerate worth $67 billion, he still considers himself foremost a newspaperman and has an editor's eye for what goes into print.

    In some cases over the years, Murdoch was known for calling in tips or tinkering with headlines, particularly at the tabloid newspapers he has owned. In 2004, Murdoch was even said by one New York Post employee to be the source for The Post's erroneous headline "Dem Picks Gephardt as VP Candidate," although The Post's editor denied that was the case.

    Murdoch's notoriety as the force behind the politically barbed Fox News Channel, the racy Sun in London and the populist Post precedes him and is part of the reason for the opposition against him among the Bancroft family and some Journal employees.

    Perhaps to soften that image, Murdoch has portrayed himself in letters to the Bancroft family as a fellow owner of a family business who would be a steward for the newspaper and maintain its independence.

    "We have a history of long stewardship of great newspapers," Murdoch wrote in a letter to the family last week, referring specifically to The Times of London, The Sunday Times and The Australian. "I always see my role as supporting the editors and publishers of these newspapers. We think we would be the ideal partner to grow and expand your company, as well as protect such a vital public trust."

    Several current and former associates said that despite some high-profile episodes over the years, Murdoch today does take a less active role in day-to-day coverage, particularly of the higher-end newspapers he owns.

    Robert Thomson, the editor of The Times of London since 2002, said that Murdoch had never called him to criticize or order up a particular story.

    "We have never talked about that day's paper or the next day's paper," he said, "never discussed a story in any way that I would interpret as being an attempt to exercise influence over news coverage."

    Murdoch said in an interview last week that he did not dictate, for example, which candidates each newspaper should endorse in a political campaign. In the last British election, for example, The Times supported the re-election of Tony Blair of the Labor Party, while The Sunday Times backed his Conservative rival.

    Thomson said that The Times had a strict separation between news and commentary — which is something that The Wall Street Journal and most United States newspapers hold sacrosanct, but not all of Murdoch's papers, particularly his tabloids, have adhered to.

    And certainly some of Murdoch's earlier clashes with editors are the stuff of lore. After the Murdoch purchase of The Times in 1981, Harold Evans, then the paper's editor, felt that Murdoch pressured him toward showing more favor toward Prime Minister Margaret Thatcher in the newspaper.

    In his memoir, "Good Times, Bad Times," Evans wrote that Murdoch did not suggest specific editorial views. Rather, he made his feelings known "by jabbing a finger at headlines which he thought could have been more supportive of Mrs. Thatcher."

    In 1983, Murdoch caused a stir when he personally secured the publishing rights to what were said to be Hitler's diaries, only to learn subsequently that they were fakes after publishing them in The Sunday Times.

    "I think he's learned quite a lot of lessons from The Times and The Sunday Times," said Andrew Neil, a former editor of the latter paper for Murdoch, who is now a television interviewer and magazine executive in Britain. "He gives his quality newspaper editors a freer hand," Neil said. "He's much more hands-on with his tabloids. If you want to know what Rupert's thinking, read The Post."

    Indeed, Murdoch said in an interview last week that he spoke with Col Allan, The Post's editor, nearly every day. If Thomson — a former veteran of The Financial Times — is any indication, Murdoch is more inclined to gossip about world affairs, politics and business. And under Murdoch, Thomson has made considerable investments in The Times including transforming it from a broadsheet into a tabloid format (known as a "compact" among those who dislike the term "tabloid") and to expand foreign bureaus significantly.

    Murdoch, who sought a meeting with the Bancroft family, has not made any of his specific plans for the company public. But he is expected to take a similar expansive approach to the much-larger Journal, which he covets as much for its online operation WSJ.com as for the print edition. (In Dow Jones, Murdoch would also be buying a major news service, Barron's, MarketWatch.com, half of SmartMoney magazine and other assets.)

    Should he ultimately succeed, one thing people who follow or have worked with him say to expect is a wrenching look at the newspaper's costs, coupled with an ambitious long-term plan to revitalize and expand The Journal's international operations and integrate them with other News Corporation Web sites around the world.

    With The Times in London, as well as The New York Post, Murdoch has also shown that he will tolerate losses, sometimes for years. He relies on the fact that newspapers account for only 14 percent of his company's more than $26 billion in annual revenues. The company's bigger and often more profitable businesses include the 20th Century Fox film and TV studio, the Fox TV network and cable channels, and the BSkyB satellite service in Britain.

    One thing that newspapers owned by Murdoch are not renowned for is critical coverage of their owner (although that is hardly unusual among media barons). As one of the most colorful and influential figures in media and business, the News Corporation chief is a frequent subject in The Journal, and not always in ways that please him.

    Gary Ginsberg, executive vice-president for corporate development at the News Corporation, said Murdoch has had no problems with almost all of The Journal's coverage of his company, including articles in the last two years about his son Lachlan's resignation as an executive from the company and about a family dispute over the trusts that control the News Corporation.

    He said the only instance when Murdoch did have objections involved a 2000 Journal profile of his third wife, Wendi Deng, which delved into her romantic history.

    "If it's a legitimate news story, Rupert would say fine," Ginsberg said. "But it wasn't a legitimate news story, in that Wendi had no role in the company at that time. What they were doing was looking for a pretext to write a public story about a private individual."

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    Heavy Options Activity Stirs Suspicions
    By VIKAS BAJAJ, May 3, 2007
    Did word of Rupert Murdoch’s offer for Dow Jones leak out early?

    On April 25, less than a week before the $60-a-share offer was publicly disclosed, an investor bought an option to buy 280,000 shares of Dow Jones for $40 in September.

    The investment was extraordinary for several reasons. Shares of Dow Jones, publisher of The Wall Street Journal, were trading at about $36 at the time and had not crossed $40 in a year. The future for newspaper companies, meanwhile, was widely considered to be grim.
    As a result, the options cost the investor a mere 85 cents a share on the American Stock Exchange.

    After Mr. Murdoch’s offer was announced on Tuesday, however, shares of Dow Jones shot up to $56 and the value of the options jumped to $17.20. The buyer of the options had a profit, on paper, of $4.6 million as of yesterday afternoon.

    The investor was either lucky, highly perceptive or — as many on Wall Street suspect — acting on insider information.

    That profitable bet was one of severally unusually large trades in the options to buy shares of Dow Jones in the last week, indicating that some investors may have known about the acquisition offer ahead of time. And that may not be surprising, given that the initial proposal was formally made in a letter Mr. Murdoch sent two weeks ago.

    Trading in options of the company is generally light and has rarely exceeded 100,000 options a day, let alone in one big trade.

    “The chances of this being just shrewd timing are zero,”
    said Jon Najarian, co-founder of OptionMonster.com, a site that studies unusual trading patterns.

    Officials at the Securities and Exchange Commission and at the Options Regulatory Surveillance Authority, a consortium of exchanges where options are traded, said they routinely look into unusual trading patterns but they declined to discuss the trades in Dow Jones options.

    The heaviest trading in Dow Jones options happened on Monday, April 30, when volumes surpassed the number of option contracts that exchanged hands for the entire month of March, and Wednesday, April 25.

    Trading in options of Dow Jones shares is so sparse that investors who want to buy or sell them pay a premium to do so, Mr. Najarian of OptionMonster.com said. He estimates that investors have made up to $10 million in profits from trades in Dow Jones options since April 25.

    Trading in actual shares of Dow Jones, by comparison, has not been as unusual. But data from Measuredmarkets, a research firm based in Toronto, suggests that trading in the stock deviated from its usual pattern on April 13 and 16, the two trading days before the company announced its first-quarter earnings report.

    Even with the more blatantly skewed options trades, though, investigators could have a hard time proving insider trading.

    Officials would have to trace the flow of insider information to the investors who benefited from the options trade through someone familiar with the News Corporation’s overture to the Dow Jones board and the Bancroft family, which has a controlling voting interest in the company. Officials would also have to prove that the person making the trade did not have another legitimate reason to buy the options.

    Instances of unusual trading in options before the announcement of blockbuster mergers and acquisitions have drawn increasing scrutiny in recent years as deal making has heated up and as options have become increasingly popular with institutional and individual investors. Their popularity has grown, in part, because they allow investors to bet on changes in the price of a stock at a fraction of the actual share price. (The number of options contracts traded in April was up 30 percent from a year ago, according to the Options Clearing Corporation in Chicago.)

    In March, the S.E.C. accused five people of insider trading in buying options to purchase the shares of TXU, the Texas energy giant that has agreed to be bought out by private equity firms in a $45 billion deal. The five are accused of making $5.3 million in illegal profits.

    “This is a big problem for the industry,” said Peter Bottini, executive vice president for trading at OptionsXpress, an online brokerage firm that specializes in options. “And I am looking for the regulators to come down hard.”


  6. Big: I thik the message has been sent. Now let's see who jumps on board with Buffet to sweeten the deal. Anyone want to venture a guess?
  7. This is Buffett's public statement on the matter, anyway:

    Buffett says unlikely he would bid for Dow Jones
    Mon May 7, 2007 3:02 PM BST

    NEW YORK (Reuters) - Warren Buffett said on Monday it's "very, very unlikely" he would bid for Dow Jones & Co. Inc. <DJ.N> as a personal investment, though he said the publisher of the Wall Street Journal has an appeal beyond economics.

    Buffett, chairman of Berkshire Hathaway Inc. <BRKa.N>, said his company couldn't bid for Dow Jones because the price is too high.

    "I couldn't do it for Berkshire," Buffett said during an interview on the business news channel CNBC.

    Buffett acknowledged that deep-pocketed investors around the world are salivating at the prospect of owning the Wall Street Journal as part of an acquisition of Dow Jones.

    But News Corp. <NWSa.N> Chairman Rupert Murdoch has set the bar high for Dow Jones, offering about a 50 percent premium for the company.
  8. In bid for icon, Murdoch may have eye on posterity

    By David D. Kirkpatrick, International Herald Tribune, May 6, 2007

    WASHINGTON: Two decades ago, Rupert Murdoch saw the Wall Street Journal as just the kind of complacent, establishment player he built his empire by taking on.

    "There is room at the top of the market to attack The Wall Street Journal," he told one of the newspaper's reporters in a 1988 interview. He had just bought a major stake in Pearson, the British owner of The Financial Times, in an unsuccessful attempt to entice the paper into a joint invasion of The Journal's home turf.

    It was the kind of idea that Murdoch has often exploited. His genius, his advisers say, has been a knack for spotting flabbiness in establishment interests that appeared impossible to unseat, and putting up competitors to do it - the former "big three" U.S. television networks before Fox Broadcasting, CNN before the Fox News Channel and the BBC before British Sky Broadcasting.

    With that history, some observers have been wondering why Murdoch, instead of launching a competitive assault, has offered $5 billion to take over Dow Jones & Co., publisher of The Wall Street Journal.

    "On its face, the numbers don't make sense," said Norman Pearlstine, the managing editor of The Journal at the time that Murdoch tried to start a rival....

    ... "That is what gets his juices flowing. He sees entrenched monopoly power and he knows that that has inefficiencies."

    ... Murdoch's advisers and allies acknowledge that, unlike many of his investments, buying The Journal would give him an emotional payoff akin to a sports fan's taking the deed to a favorite team. But they argue that he may have less sentimental plans in mind as well.

    To begin with, Murdoch is planning an upstart business news network to rival the currently dominant CNBC, which features Wall Street Journal news and reporting as part of an exclusive deal with Dow Jones. Stealing that alliance or even incorporating The Journal's name could be a major advantage to the new network, and a successful cable network like CNBC alone might be worth as much as the $5 billion purchase price.

    ... One adviser to Murdoch, speaking anonymously to talk freely, said he aims to greatly expand The Journal's Asian and European editions.

    Another adviser, Stanley Shuman of the investment firm Allen & Co., who has worked with Murdoch for more than 30 years, said: "The Journal is a franchise he would like to own, but not just for the sake of owning it. He feels he can help them realize their business potential."

    As for the Bancroft family, which controls Dow Jones and has so far declined to sell, Shuman said Murdoch "is willing to make the promises necessary."...

    Full article: http://www.iht.com/articles/2007/05/06/business/rupe.1-46409.php
  9. SEC: Insider Trading on Dow Stock
    By Larry Neumeister, Associated Press, Tuesday May 8, 12:45 pm ET

    SEC Says Hong Kong Couple Had Insider Information Before Buying Dow Jones Stock

    NEW YORK (AP) -- The Securities and Exchange Commission Tuesday accused two Hong Kong residents of "widespread and unlawful trading activity" when they bought $15 million of Dow Jones & Co. stock ahead of an announcement that News Corp. was seeking to buy the company.

    The lawsuit in U.S. District Court in Manhattan named as defendants Kan King Wong and Charlotte Ka On Wong Leung, a married couple. It alleged they made "highly profitable and highly suspicious" stock purchases based on inside information between April 13 and April 30.

    The lawsuit did not explain how the couple would have obtained inside information on the pending offer. There was no information on whether the couple has a lawyer in the United States. A message left with the SEC lawyer who filed the lawsuit was not immediately returned.

    According to the lawsuit, Wong and his wife bought 415,000 shares of Dow Jones stock in the two weeks prior to the May 1 announcement that News Corp. had offered to buy Dow Jones.

    The purchases occurred while the couple possessed material non-public information about the offer of News Corp. to acquire Dow Jones, the lawsuit said.

    "In advance of the announcement, defendants engaged in widespread and unlawful trading activity," the lawsuit said.

    After the public announcement, the value of Dow Jones stock rose 58 percent, causing the couple's Merrill Lynch & Co. account in Hong Kong to grow to $23 million, a net gain of $8.18 million.

    The couple did not have enough money in their brokerage account to buy all the shares of Dow Jones stock on April 13 so $3.18 million was wired to their account five days later from the father of Charlotte, according to the lawsuit.

    The lawsuit sought a court order requiring the couple to give up all profits and pay civil penalties.

    Jeffrey Lerner, a spokesman for the New York attorney general, Andrew Cuomo, declined comment Tuesday on the allegations against the Wongs.

    Federal and state authorities have said they are [also] investigating suspicious options trading in Dow Jones stock prior to the announcement of News Corp.'s $5 billion bid for the financial news publisher.

    News last Tuesday of the $60-per-share bid by Rupert Murdoch's company sent Dow Jones shares soaring.

    A spokesman for Dow Jones, which publishes The Wall Street Journal, said Monday that it has received a subpoena from the New York attorney general's office and a request for information from the Securities and Exchange Commission regarding options trading.

    Dow Jones will "cooperate fully" with the authorities, company spokesman Howard Hoffman said.

    Murdoch's bid has been opposed by Dow Jones' controlling shareholders, the Bancroft family, but the family has been divided over the offer.

  10. Journal held Murdoch story, report says

    Newspaper's top editor became aware of impending offer for Dow Jones from Murdoch e-mail;
    information could weigh in SEC probe

    CNNMoney.com, May 8 2007: 12:33 PM EDT

    NEW YORK (CNNMoney.com) -- Wall Street Journal editors knew media mogul Rupert Murdoch had made a bid to buy Journal parent Dow Jones but held the story until getting scooped by CNBC, according to a report published Tuesday. [...... !!]

    The decision by Editor Paul E. Steiger could play into the Securities and Exchange Commission's investigation into whether several hundred thousand Dow Jones (Charts) options were traded using insider information the day before news of the bid became public, The New York Times reported. The New York state attorney general also is involved in the probe.

    Securities investigators became suspicious due to a spike in options trading the day before the announcement, which itself led to a 50 percent surge in Dow Jones stock. Investigations are routine when options trading shows sharp increases in front of mergers, the Times noted.

    Dow Jones spokesman Howard Hoffman told CNN that the SEC and state authorities have subpoenaed the company and that it was cooperating with authorities.

    However, Hoffman would not say if the SEC and NY AG were investigating suspicious options trading of Dow Jones stock ahead of news of News Corp's bid for the company last week.

    A spokeswoman for the Securities and Exchange Commission would not comment on the matter.

    Steiger learned of Murdoch's $5 billion bid through an e-mail Murdoch had sent him labeled "personal and confidential," according to sources quoted by the Times.

    Steiger felt bound by the confidential nature of the communication and chose not to report it publicly, a Journal spokesman told the Times. The spokesman said Steiger made the decision not to publish himself, without interference from others in Journal management.

    The report said talk of the offer extended beyond the Journal newsroom. Financial news channel CNBC reported the offer May 1 and the Journal posted an online version shortly thereafter.

    Today's news comes amid news of even more media consolidation, Dow Jones' competitor in business news, Reuters (Charts), is itself in merger discussions with financial data provider Thomson Corp (Charts)., which has offered $17.7 billion for the wire service.

    #10     May 8, 2007