Murdoch breaks Bancroft barrier, wins Dow Jones war

The three dozen members of the Bancroft family had engaged in a intense debate about The Journal’s future. Some argued vociferously that Murdoch would damage the newspaper’s credibility, while others said that his offer was too good to pass up at a time when the newspaper industry has been struggling. At $60 a share, News Corporation is paying a heavy premium for a stock that traded around $36 before the offer became public on May 1.

The acquisition of The Journal, along with the planned launching of the Fox business news channel by News Corporation in October, makes Murdoch the most formidable figure in business news in the USA. The deal follows the recent sales of the Tribune and Knight Ridder chains. For The Journal’s competitors and the rest of the industry, it again raises the question whether newspapers can exist independent of giant media conglomerates as advertising dollars migrate to the Web and readers have access to vast new sources of online information.

As if to mirror the anxiety of the entire newspaper industry, the Bancrofts finally voted on the bid after months of internal debate and shifting alliances within the family, which has controlled Dow Jones for more than a century. The outcome remained in doubt until the final days, with family members and trustees who control their stock jockeying for position and switching sides, shifting millions of shares from one side of the vote to another.

To the last, people inside and outside Dow Jones who opposed the sale to the News Corporation were trying to arrange alternative deals that would allow some family Bancroft family members to sell and others to keep control of the company.

Brad Greenspan, an Internet entrepreneur, said that in the last few days, he had arranged conversations between one of his tentative backers for such a bid, Intel Capital, and Leslie Hill, a family member who sits on the Dow Jones board.

The Bancroft family, which has owned Dow Jones since 1902, holds 64 per cent of the shareholder vote, most of it in a complex series of dozens of trusts with some three dozen beneficiaries. But the bulk of the voting power rests with a handful of members of family’s oldest generation who are the primary trustees, and with family lawyers who are also trustees.

Advisors to News Corporation said it needed family members representing at least 30 to 34 percent of the total shareholder vote to commit to the deal before proceeding with it, assured of topping 50 per cent in an actual ballot.

The Ottaway family, with 7 per cent of the vote, was solidly opposed to the sale. That left 29 per cent of the vote in other hands, expected to be overwhelmingly in favor, but it is hard to estimate what fraction of those shareholders would have voted no, and how many simply have not voted. The deal requires more than half the total votes outstanding.

For Murdoch, the Dow Jones takeover gives him not only one of the world’s great media trophy properties and a larger voice in national affairs, but also a ready source of material and credibility for his newest big gamble, the Fox Business Channel he plans to launch in October.

Under a deal with CNBC, that channel has the exclusive right to use Dow Jones content and have Dow Jones reporters and editors appear on its programs until 2012. But Murdoch, whose new channel would compete with CNBC, has long been known for taking the long view, willing to wait years for his investments to pay off.

Dow Jones’s centerpiece is The Journal, with domestic circulation of more than 2 million six days a week, second only to USA Today, but the company also includes many other parts, like the financial weekly Barron’s, Dow Jones Newswires, the Web site MarketWatch and Factiva, an electronic news archive and information service.

Analysts predict that News Corporation would sell some or all of Dow Jones’s 23 small daily and weekly newspapers, most of them in New England and upstate New York.

Murdoch first made his offer to Dow Jones’s chief executive, Richard F Zannino, over breakfast on March 29, and made a formal, written bid to the board on April 17, but the news did not break until May 1.

On May 2, Zannino made a presentation to the Dow Jones board that made it seem that the company’s prospects on its own were poor and that he favoured a sale. He later insisted that he had not meant to give those impressions, but even so, the presentation had a sobering effect, and most of the board clearly thought that Murdoch’s $60-a-share offer was simply too good to pass up.

That breakfast with Murdoch set in motion a four-month struggle within the Bancroft family. Factions formed and dissolved, and momentum swung widely as family members changed sides, children were pitted against parents and, in some cases, siblings opposed each other.

For a private, reserved clan that had long frowned on confrontation or aggressive involvement in the company’s affairs played out with the news media attempting to dissect their personalities and rivalries.