Rupert Murdoch isn’t easily outfoxed. But the Bancroft family, which sold him Dow Jones, publisher of The Wall Street Journal, looks to have got the better of the media mogul.
Click here for breakingviews.com
The latest News Corp. earnings crystallize the value destruction that Murdoch’s pursuit of the financial publisher has wrought for shareholders. News Corp. paid $5 billion (Rs24,350 crore today) for Dow Jones in December 2007.
As any reader of the Journal knows—and that should include News Corp. auditors—the bottom fell out of the financial industry shortly thereafter.
News Corp.’s quarterly results include impairment charges of $3.06 billion, mostly related to Dow Jones. That suggests it still ascribes some $2 billion of value to the business. Is it worth that much? It’s hard to say. But it would be hard to call this a mark-to-market valuation when one considers how Dow Jones’ rivals have fared since Murdoch nabbed his quarry. The New York Times Co. shares have fallen 70%. Gannett Co. Inc. has lost 86% of its value. Take the average of those declines and apply it to the price Murdoch paid and Dow Jones would be worth $1 billion. That implies the $5 billion that Murdoch paid was fair. He paid a $2 billion premium. Had Dow Jones remained independent, it would be worth even less.
Of course, Murdoch loves newspapers. He may be the last billionaire on the planet who does. And he may even have some tricks up his sleeve, and fairy dust in his pocket, to enable the Journal to buck the industry’s downward trend.
But on the evidence so far, it’s hard not to conclude that the Bancrofts will have the last laugh.
(News Corp. became a minority investor in breakingviews.com following its acquisition of Dow Jones. WSJ has an exclusive content partnership in India with Mint.)