Rupert Murdoch finally won his long-coveted prize on Tuesday (31 July), gaining enough support from the deeply divided Bancroft family to buy Dow Jones & Co., publisher of The Wall Street Journal and one of the world's most respected news sources, for $5 billion (Rs 20.075 crore).
For Murdoch, the verdict represents the pinnacle of his long career building News Corp. into a $70 billion media empire that already includes more than 100 newspapers worldwide, satellite broadcast operations, the Fox television network, the online social networking site MySpace and many other parts.
Combined with the planned beginning of the Fox business news channel in October, the purchase of Dow Jones makes Murdoch the most formidable figure in business news coverage in this country, perhaps worldwide.
It also gives a larger voice in national affairs to an owner whose properties often mirror his own conservative politics.
The boards of both companies voted on 31 July night to approve the deal.
The decision signals the end of an era for Dow Jones and the controlling Bancroft family, an intensely private clan that for generations had allowed The Journal to operate independently and become one of the nation's most prominent and trusted newspapers, even as its finances deteriorated.
For four months, some three dozen members of the Bancroft family engaged in an intense, sometimes tearful debate about The Journal's future, at times pitting siblings against one another and children against their parents.
The final decision was in doubt well past the 5 p.m. Monday (30 July) deadline set for the family. In a twist in already tortured negotiations, some family trustees demanded that News Corp. pay the fees for the family's bankers and lawyers -- which could reach $40 million -- in return for their support. After an exhausting night of conferences calls, the deal was made.
James B. Lee of JPMorgan Chase, who has represented clients in some of the biggest deals in history, said of Murdoch, "nobody else I have ever banked could have pulled it off."
For the rest of the industry, the deal, which follows the recent sale of Knight Ridder and the pending sale of the Tribune Co., again raises the question whether newspapers can exist independently of giant media conglomerates, as advertising dollars migrate to the web and readers have access to vast new sources of online information.
Murdoch has talked of pumping money into The Journal, beefing up its coverage of national affairs and its European and Asian editions, which could pose a serious challenge to competitors like The Financial Times and The New York Times. That could mean losing money in the short run, something Murdoch has always been willing to do to attract readers and gain influence.
Some Dow Jones employees see having such a wealthy, engaged owner as an improvement after years of uncertainty. Still, there was no official announcement at The Journal's newsrooms, where some reporters mourned the loss of independence.
"It's sad," said a veteran reporter at one of The Journal's domestic bureaus, who did not want to be named because of concerns over his career. "We held a wake. We stood around a pile of Journals and drank whiskey."
News reports of the deal triggered an outpouring of comments on The Journal's own website, many critical of News Corp., and some regrets from other shareholders.
"It's a bad thing for Dow Jones and American journalism that the Bancroft family could not resist Rupert Murdoch's generous offer," James H. Ottaway Jr., a former Dow Jones executive and a major shareholder, said Tuesday. "I hope Rupert Murdoch, and whoever follows him at News Corporation, will keep his promises to protect and invest in the unique quality and integrity of the Wall Street Journal, Barron's and all the Dow Jones electronic news services."
It will likely take three to four months for the transition in ownership to take effect. At the family's insistence, News Corp. has agreed to retain the top editors at Dow Jones, including Marcus W. Brauchli, the managing editor of The Journal, and Paul Gigot, The Journal's editorial page editor, and has accepted limits on its ability to remove or replace people in those posts.
The Bancrofts hope the arrangement, which they negotiated before the final deal, will restrict Murdoch's ability to influence content, particularly in The Journal, but many media experts have said he had circumvented similar agreements in the past.
Murdoch first made his offer to Dow Jones' chief executive, Richard F. Zannino, over breakfast on 29 March, and made a formal, written bid to the board on 17 April, but the news did not break until 1May.
On 2 May, Zannino made a presentation to the Dow Jones board that made it seem to many of them 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 the company should accept Murdoch's $60-a-share offer.
That breakfast with Murdoch set in motion a four-month struggle within the Bancrofts. The family, which has owned Dow Jones since 1902, holds 64% of the shareholder vote, with most of the stock held in dozens of trusts with some three dozen beneficiaries. But the bulk of the voting power rests with a handful of members of the family's oldest generation, and with longtime family lawyers, who are the primary trustees.
Some argued vociferously that Murdoch would damage the newspaper's credibility, while others said that his $60-a-share offer -- for a stock that was trading around $36 in April -- was too good to pass up at time when the newspaper industry was struggling.
Most of the elders began the process opposed to selling to the deal, bolstered by newsroom employees who wrote letters arguing that Murdoch would wreck The Journal, and by the advice of longtime associates like Peter R. Kann, the recently retired former chairman and chief executive of the company, and Ottaway.
But many of their children, less wealthy and less steeped in the notion of Dow Jones as a family legacy, were more open to selling. A family Dow Jones stake that had been valued at about $750 million and generated about $20 million a year in dividends, mostly for the older generation, stands to become more than $1 billion even after taxes and could produce several times as much income.
Late last week, it appeared that the family might reject the deal, but then two pivotal family elders who had argued against the deal, Jane Cox MacElree and her brother, William C. Cox Jr., shifted positions; she relinquished voting control of some shares, and he switched sides and decided to support the deal, people close to the family said. That left things too close to call.
While the previous months had been spent arguing over principles, the last few days were spent haggling over money. Before the deal had a clear majority in support, a lawyer for the family, Lynn Hendrix, based in Denver, who controlled trusts with 9 percent of the overall vote, insisted that those trusts would oppose the deal unless News Corp. agreed to pay a premium for the super-voting shares that are mostly owned by the Bancrofts.
On Sunday night, David F. DeVoe, News Corp.'s chief financial officer and a board member, called Hendrix, a partner at the firm Holme, Roberts & Owen, to draw a line in the sand.
Referring to the agreed-on $60 price, DeVoe said, "I can six-zero-point-zero-zero," a person briefed on the conversation said, "not six-zero-point-zero-one."
When Hendrix kept pushing for more money, DeVoe made an unusual offer: New Corp. would consider paying the fees and expenses of the bankers and lawyers advising the trusts. That amounted to an indirect way of sweetening the offer for the super-voting shares without adding much to the cost of the deal. Dow Jones, after consulting with News Corp., had already agreed to cover some of the costs of paying Merrill Lynch, the family's primary financial advisers on the deal.
The largest share, perhaps as much as $18.5 million, will be paid to Merrill Lynch, people briefed on the matter said. Another payment of as much as $10 million is expected to be paid to Wachtell, Lipton, Rosen & Katz, a law firm representing the family. Morgan Stanley, which advised the Denver trusts, and a series of law firms are expected to split the rest.
The issue of News Corp. and Dow Jones paying the family's advisers has raised questions in some circles -- including among some family members, people close to them say -- about how impartial the advice they received was. Merrill Lynch, in particular, was viewed as an early supporter of the deal and was responsible in large part for making presentations to the family about the current and future health of Dow Jones.
By late Tuesday (31 July), people involved in the negotiations said family trusts and family members representing about 40% of the total shareholder vote had committed, at least verbally, to support the deal, more than enough to put it over the top in a shareholder vote. Neither Dow Jones nor News Corp. would officially confirm that, heading into a 7 p.m. Dow Jones board meeting.
To the last, people inside and outside Dow Jones who opposed the sale to News Corp. were trying to arrange alternative deals that would allow some family Bancroft family members to sell and others to keep control of the company.