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News Corp. to buy Dow Jones for $5.6 billion

Dow Jones' board decides to accept Rupert Murdoch's "generous offer," the Bancroft family confirms.
Written by ZDNET Editors, Contributor on
News Corp. said on Wednesday that it would buy Dow Jones for $5.6 billion, adding The Wall Street Journal to its worldwide media empire and ending a century of family ownership of one of the top U.S. business news sources.

The hard-fought deal--won after long negotiations and intense wrangling among members of Dow Jones' controlling shareholder, the Bancroft family--helps News Corp.'s Rupert Murdoch achieve his decades-long dream of running the venerable financial daily.

The Journal and other Dow Jones properties also add to Murdoch's sprawling media empire--from the Fox television stations and the MySpace.com online social network to the Times of London and HarperCollins Publishers--and would aid the launch of a Fox business channel later this year.

In a joint statement, Dow Jones and News Corp. said Bancroft family members holding about 37 percent of Dow Jones' voting power agreed to support the deal.

That level of support represents more than half of the 64 percent voting shares held by the family.

"The process of thoroughly reviewing a broad range of possible alternatives for Dow Jones has been long, complex and arduous."
--Bancroft family statement

Dow Jones shareholders still must approve the buyout, an outcome that analysts have said is all but guaranteed, given the 65 percent premium that Murdoch offered.

Dow Jones, which competes with Reuters Group, also owns the Barron's financial weekly, the MarketWatch financial news Web site and Dow Jones Newswires.

Other News Corp. properties include the American Idol singing talent show, on the Fox network, and British tabloid newspaper The Sun, which features photographs of topless women on its "Page 3."

Under the terms of the agreement, which has been approved by the boards of both companies, Dow Jones shareholders will receive $60 in cash for each share of common stock or Class B common stock that they own, the companies said.

Up to 250 shareholders would be allowed to convert their Dow Jones shares into Class B shares of the News Corp. subsidiary that will house Dow Jones. They then could exchange those shares for Class A News Corp. shares.

The move, which covers up to 10 percent of Dow Jones shares, would let eligible shareholders avoid a tax hit on the transaction. The eligible shareholders are not limited to Bancroft family members, said a source familiar with the matter.

One Bancroft family member or another "mutually acceptable person" will be appointed to the News Corp. board, the companies said.

They also agreed on a five-member committee to oversee the editorial independence of Dow Jones' news operations.

The members include retired Associated Press Chief Executive Louis Boccardi, Massachusetts Institute of Technology Media Lab co-founder Nicholas Negroponte, former Tribune Publishing President Jack Fuller, former Washington State Congresswoman Jennifer Dunn and former Detroit News editorial page editor Thomas Bray.

Bray also is a writer for Dow Jones' OpinionJournal. The Journal reported that he will serve as chairman of the committee.

Dow Jones was also discussing a plan to have News Corp. cover the legal fees incurred by the Bancroft family, amounting to at least $30 million, a source familiar with the matter said Tuesday.

The acquisition is expected to close in the fourth quarter, the companies said.

The Bancrofts are among a group of venerable newspaper families that includes the Sulzberger clan, who run The New York Times Co., and the Chandlers, who cashed out of Tribune Co. earlier this year.

Unlike their peers, the Bancrofts refrained from interfering with the Journal's news operations. But that remoteness amid sweeping changes in the way people get their news due to the Internet led to criticism that the family was neglecting the company.

"The process of thoroughly reviewing a broad range of possible alternatives for Dow Jones has been long, complex and arduous," the Bancroft family said in a statement.

In selling to Murdoch, the Bancrofts pass Dow Jones to another media dynasty. Murdoch, who built News Corp. from two Australian papers, also controls his global media empire and sees its future someday in the hands of his children.

Winning Dow Jones did not come easy. The 76-year-old media mogul spent at least the past three months courting the Bancroft family, and he thanked them after clinching the deal.

"I want to offer the Bancrofts my thanks, and an assurance that our company and my family will be equally strong custodians," he said.

The family initially rejected Murdoch's bid over fears that he would tarnish the Journal's image and use Dow Jones' news operations to further his business interests. Many Journal reporters and some other Dow Jones employees also opposed the deal and sought to attract other buyers.

"It's a bad thing for Dow Jones and American journalism that the Bancroft family could not resist Rupert Murdoch's generous offer," said former Dow Jones board member and executive Jim Ottaway Jr., whose family controls 7 percent of Dow Jones' voting shares.

"It's a sad thing that the 105-year family tradition of protecting Dow Jones' independence as a public trust will end," he said in a statement.

In the end, the rich offer proved too attractive for many family members to resist, and it all but eliminated the possibility of competing proposals.

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