Is Murdoch’s Offer Too Good To Refuse?

RUPERT Murdochs audacious bid for Dow Jones & Company puts further pressure on the venerable families that own Americas most respected newspapers to perform or sell out.

His bid — pitched at a 65 per cent premium to the price the shares had been fetching on the sharemarket — was swiftly rejected by the controlling shareholders of Dow Jones, the Bancroft family, at least officially.

The newspapers own website, however, reported that four days earlier, a preliminary family tally showed that fewer than half of those with voting shares opposed Murdochs bid, according to a source described as close to the board.

Given such reports, it would not be surprising if the family has to vote again soon, especially if Murdochs bid triggers an auction for the company.

The Bancroft family keeps a low profile. The Wall Street Journals website described the 30 or so members as a clan, and suggested there had been fierce lobbying over the bid.

Its shareholding is reported to be controlled through a family trust, with older generations receiving bigger dividends. One family member, Leslie Hill, recently admitted the family was unhappy with the companys performance.

Murdochs bid highlights the dual share structure by which the Bancroft family controls Dow Jones: the Graham family controls The Washington Post and the Ochs-Sulzberger family controls The New York Times, despite not holding a majority of their companys market capitalisation.

For example, although the Bancrofts own less than 25 per cent of Dow Jones, they have more than 50 per cent of voting power through a two-class share structure.

The share prices of all three companies are wallowing in the face of an industry-wide downturn. The New York Times is staring down a shareholder revolt, which last week resulted in 42 per cent of shareholders withholding their support for the election of directors.

Murdoch controls News Corp through a similar structure. He has just bought out fellow mogul John Malone by selling him the satellite business DirecTV, in the process consolidating his control of voting shares.

But unlike the traditional newspaper companies, News Corps share price is rising, as the market applauds his internet acquisitions and booming profits.

The Bancroft family decision will hardly please the long-suffering shareholders of Dow Jones. Murdochs offer price has not been seen by its shareholders since 2002.

And now that they have rejected it, the share price could retreat further as disgruntled shareholders bail out.

The management, having rejected the bid out of hand, will now have to explain how it intends to revive the share price.

News Corp described its bid as "friendly", and in an interview on his own Fox News Channel, Murdoch described the Bancrofts as great custodians, saying: "We are the sort of people with the same traditions."

Murdoch was recently part of an unsuccessful bid for the Tribune group, which owns the Los Angeles Times, the Chicago Tribune and Newsday.

Despite this, he has signalled that News Corps future lies online. His MySpace continues to fulfil its promise of becoming one of his greatest bargains, while he recently did a deal with NBC Universal to distribute movies, television and videos online in a challenge to Googles YouTube.

Dow Jones already has a strong online presence, which Murdoch says he wants to increase. It claims to have more than 750,000 paid subscribers to the online version of The Wall Street Journal, one of the few journalism websites that charges for its content.

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