Another good Bloomberg article. Rupert Murdoch appears to be a master strategist for the future of his News Corp.: Murdoch's Bid Places Google-Like Value on Dow Jones By Leon Lazaroff May 11 (Bloomberg) -- Rupert Murdoch's $5 billion takeover bid for Dow Jones & Co. values the Wall Street Journal publisher higher than Google Inc., based on a measure used by analysts. News Corp.'s $60-a-share offer represents almost 40 times Dow Jones's projected 2007 earnings, data compiled by Bloomberg show. Google, owner of the world's largest search engine, trades at about 32 times projected 2007 profit. ``Dow Jones's organic growth doesn't come anywhere close to Google,'' said New York-based UBS AG analyst Brian Shipman, who rates Dow Jones shares ``neutral.'' ``If you're going to support that kind of valuation, it should have that kind of growth.'' Murdoch is pricing Dow Jones at almost double the valuation McClatchy Co., publisher of the Miami Herald, put on Knight Ridder Inc. last year and that real estate billionaire Sam Zell is offering for Tribune Co., owner of the Los Angeles Times. News Corp.'s bid represents about 17 times Dow Jones's projected 2007 profit before interest, taxes, depreciation and amortization, or Ebitda, based on estimates by Prudential Equity Group analyst Steven Barlow in New York. McClatchy, based in Sacramento, California, paid 9.5 times projected profit on that basis for Knight Ridder last year, Shipman said. Zell is offering 10 times earnings for Tribune. Gannett Co., the largest U.S. newspaper publisher, trades at 12 times projected 2007 profit. `Hard to Justify' ``Given that you can buy GE at 16 times earnings, it's hard to justify an acquisition multiple as high as Murdoch's bid for Dow Jones,'' said Robert F. Bruner, dean of the University of Virginia's Darden School of Business and author of ``Deals From Hell.'' ``Investors need to ask carefully what synergies might arise from the combination of News Corp. and Dow Jones that could justify the extremely high multiple.'' Toronto-based Thomson Corp., owner of the Westlaw legal database and TradeWeb bond trading network, has put a similar value on London-based Reuters Group Plc, the dominant currency- trading service and operator of 196 news bureaus. Thomson has offered 8.77 billion pounds ($17.5 billion) for Reuters, or 33 times next year's estimated earnings and 17 times Ebitda. Buying New York-based Dow Jones would give Murdoch, News Corp.'s chairman, a global financial news organization to support the Fox business channel he plans to start this year as well as his television and Internet properties in Europe, China and India. Winning Dow Jones also would expand his stable of 170 newspapers to include the Journal, which has the biggest U.S. circulation after Gannett's USA Today. Global Organization ``Dow Jones isn't Google, but for Murdoch it offers a means to become No. 1 worldwide in business news, and business news has become one of the most lucrative magnets for advertisers,'' said Ken Doctor, an analyst at Burlingame, California-based Outsell Inc., a market-research company. News Corp. owns 35 U.S. television stations, the Fox News Channel, film studios and cable-TV and satellite networks in the U.K., Italy and Asia. The company's newspaper holdings include The Times of London and the New York Post. Dow Jones rose 55 percent on May 1, when Murdoch's offer was announced, while News Corp. fell 94 cents, or 4.2 percent, to $21.45. Dow Jones rose 29 cents to $52.04 at 9:47 a.m. in New York Stock Exchange composite trading. New York-based News Corp.'s Class A shares rose 12 cents to $21.38. Reuters shares surged a record 25 percent to 615.75 pence on May 4, after the company said it was approached about a takeover. Reuters shares rose 9.5 pence, or 1.6 percent, to 611 pence in London. Swaps Little Changed Credit-default swaps-based on $10 million of News Corp. debt are little changed at $17,000 since it made its bid for Dow Jones, according to Deutsche Bank AG. Credit-default swaps are based on corporate bonds and are used to speculate on a company's ability to repay debt. An increase indicates a worsening in credit quality. Bloomberg LP, the parent of Bloomberg News, competes with Dow Jones and Reuters in selling news and information to the financial services industry. Murdoch's interest in Dow Jones centers on the content and prestige of the Journal, said Hal Vogel, a New York-based analyst and author of ``Entertainment Industry Economics.'' Expansion Aid News Corp., Vogel said, would probably use the Wall Street Journal to expand business news programming on the company's television outlets in Europe, through the BSkyB cable network, and in Asia, through Star TV. ``Content is king sounds logical, but if you can't distribute it, it's worthless,'' said Vogel. ``The Wall Street Journal has the ability to produce content, but they don't have anywhere near the global distribution that Rupert Murdoch has.'' Murdoch, 76, probably sees ways to integrate Barron's, wsj.com, the MarketWatch financial Web site and Dow Jones Newswires into his broadcast, cable, Internet and print businesses, said Michael Chren, managing director of Allegiant Asset Management Co. in Palm Beach Gardens, Florida, which had 780,000 Dow Jones shares as of March. ``It's very difficult to value the synergies that Murdoch apparently believes can be created,'' Chren said. ``What is clear is that Murdoch is a strategic buyer coming able and willing to fold Dow Jones into his global media empire and create tremendous value.'' MySpace Murdoch spent $580 million in 2005 to buy MySpace.com, the social networking site with $79 million in sales. In 2006, MySpace reached an advertising agreement with Mountain View, California-based Google that will pay News Corp. $900 million over three years. Murdoch has touted Dow Jones's success on the Internet as one of the reasons for the offer, News Corp. spokesman Andrew Butcher said in an interview. Dow Jones got 40 percent of its $1.78 billion in sales last year by disseminating information on the Internet and on hand-held devices including mobile phones. Dow Jones spokesman Howard Hoffman declined to comment. With $5.4 billion in cash as of Dec. 31, Murdoch could buy Dow Jones without adding to his company's $11.4 billion in borrowings, credit rating company Standard & Poor's said. ``This is clearly sufficient'' to complete the purchase", Standard & Poor's said on May 1. S&P has a BBB investment grade rating on News Corp. debt. Eating Into Profit Buying Dow Jones at $65 a share would reduce News Corp.'s projected 2008 profit of $1.30 a share by 2 cents, said Richard Greenfield, an analyst at Pali Capital Inc., who rates the shares ``buy.'' ``Investors have initially disagreed with the vast majority of News Corp.'s acquisitions,'' Greenfield wrote on May 3. ``The overwhelming majority have created substantial value.'' Even with the purchase, News Corp. would still be able to buy back $10 billion of its stock in 2008 and 2009, Greenfield wrote. Members of the Bancroft family, who have controlled Dow Jones since 1902 and hold 64 percent of the voting power, say shares equaling 52 percent oppose a sale to Murdoch. Another block of family shareholders, the Ottaways, who sold their chain of community newspapers to Dow Jones in 1970, said they would vote their 6.2 percent stake against a sale. Without a sale, shares of Dow Jones will lose much of the almost $20 they gained when Murdoch announced his bid, said Chren of Allegiant Asset Management. ``If the Bancrofts turn down Murdoch and a deal doesn't get done, the stock probably falls into the low $40s, retaining some takeout value,'' Chren said. To contact the reporter on this story: Leon Lazaroff in New York at llazaroff@bloomberg.net http://bloomberg.com/apps/news?pid=20601109&sid=a3WACvIn3esQ&refer=home
Maybe in seven years, or so, we'll find out the true facts in this case: Insider trading case elicits yawns in Hong Kong By David Pierson, Times Staff Writer, May 12, 2007 HONG KONG â In this entrepreneurial city, connections are king and backroom deals are common. So that may help explain the muted reaction this week when a couple linked to a prominent banker was accused of insider trading in Dow Jones & Co. stock. "In America, you have the SEC taking a very close look at insider trading," said Raymond So, associate dean of undergraduate studies at the Chinese University of Hong Kong's school of business administration. "In Hong Kong's case, we don't seem to have such enforcement. I cannot say it's not serious, but it's very difficult to identify. The market here expects insider trading to occur, but it does not pay too much attention." On Tuesday, the U.S. Securities and Exchange Commission accused a Hong Kong couple, Charlotte Ka On Wong Leung and Kan King Wong, of buying Dow Jones shares last month based on an inside tip that Rupert Murdoch-led News Corp. was preparing a buyout offer. The couple allegedly made more than $8 million in illegal profit when the offer became public May 1 and sent shares of Dow Jones â owner of the Wall Street Journal â soaring. The SEC complaint did not say how the couple became aware of the Murdoch bid. But attention soon focused on David K.P. Li, who sits on the Dow Jones board. Li, head of the Bank of East Asia and a prominent legislator, is a longtime business associate of Michael Leung, father of Charlotte Leung. Li declined to comment for this story. He was quoted by the Wall Street Journal as saying, "I know Michael, and he is a friend, but I certainly did not talk to him about Dow Jones." A Dow Jones spokesman said Friday that Li was not the subject of any internal inquiry. The Wongs could not be reached for comment. According to the SEC complaint, the Wongs did not have enough to pay for the stocks, so Leung wired $3.1 million to his daughter and son-in-law's account April 18. There is no mention in the court documents of Li, who has had a long association with Leung. Leung is a director of Bank of East Asia in Canada, and the two men serve on the executive committee of the St. James Settlement charity group. Insider stock trading is not uncommon in Hong Kong. An enforcement agency, the Insider Dealer Tribunal, is famously understaffed and ineffective at recovering the millions of dollars it levies in fines. This month 11 members of a communications company were fined $3.4 million for insider trading, seven years after the violation was reported. Last year a member of a property investment company was forced to pay $4.3 million in fines â also seven years after the insider trading came to light. "They lack investigative resources and probably lack willpower from the government to bring prosecution," said David Webb, a Hong Kong-based financial watchdog and website editor. "They know it to be wrong and illegal, but the point is if you don't have strong enforcement of laws, then the effect of deterrent is diluted." Irene Wong, a spokeswoman for Hong Kong's Security and Futures Commission, denied that officials were weak in enforcing insider information. She declined to comment on the Dow Jones inquiry but said the commission would cooperate fully with the SEC. Li, born in London and schooled in Cambridge, was born into the family that founded Bank of East Asia in 1918. His influence as chairman of the bank and as a senior legislator in finance has led to dozens of other roles as patron of the arts and the board of Hong Kong's chief English newspaper, the South China Morning Post. He and his company have also been significant donors in the campaign that successfully elected Donald Tsang as Hong Kong's chief executive. Li's brother, Arthur Li, is a surgeon and secretary of education. An uncle, Simon Li, was the first Chinese to serve on the Court of Appeals in the former British colony. Cousin Andrew Li was Hong Kong's first chief justice. And another uncle, Ronald Li, was formerly head of Hong Kong's stock exchange before being convicted of accepting bribes. "People will not believe that David Li would be involved in insider trading," said So, the Chinese University of Hong Kong professor. "He's too rich. And he won't dare risk his own wealth and reputation." http://www.latimes.com/business/la-fi-insider12may12,1,374834.story?coll=la-headlines-business