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Bloggers across the Net think that Dow Jones is going to have a very hard time remaining an independent company
Who will step forward? After Rupert Murdoch's $5 billion bid for Dow Jones & Co. (DJ), bloggers speculated feverishly on whether alternative bidders will emerge for the parent of The Wall Street Journal and, if so, who they will be. The traditionalists were rooting for the New York Times Co.(NYT) or the Washington Post Co. (WPO), while others contemplated the possibilities for Bloomberg, Reuters (RTRSY), or even Google (GOOG).
One thing is becoming clear: Dow Jones is going to have a very hard time remaining independent. Late on May 2, Dow Jones said it would take no action on the offer because Michael B. Elefante, a representative for the Bancroft family, has said that the family and various trusts representing "approximately 52% of the outstanding voting power of Dow Jones" would vote against the News Corp. proposal. But bloggers argued that Dow Jones and its board will have a hard time turning down an offer that represents a 60% premium over where the stock was trading—and could become much higher if the bidding escalates.
The blog Bluematter points out that there's a serious litigation risk if Dow Jones board rejects the offer and no alternatives emerge. "55% jump in the share price upon publication of the offer? If I was a shareholder, I'd sue too," the blogger writes.
In Whose Interest?
The Bancrofts may have voting control. But the board still has a fiduciary duty to the rest of the shareholders at the company. Because the premium from Murdoch's News Corp. (NWS) is so substantial, directors could open themselves up to liability if they reject the bid and the stock price drops back from nearly $60 a share to $30-or even lower. The Bancroft family does have voting control over the company, but there's "a limit to their ability to say no," one shareholder told Betsy Streisand at U.S. News & World Report.
Zac Bissonette, one of the most active writers at AOL's bloggingstocks, dug up the details behind the dilemma. He looked through the company's rules of corporate governance and found that the "principal duty" of the board and management is to make sure that the company is "well-managed in the interest of its shareholders." But the rules also say that the company should "protect and preserve the quality, independence, and integrity of its products and services." Then Bissonette writes that "those two stated goals may be in direct contradiction with each other as the company considers News Corp's bid."
The pressures will only grow if other bidders enter the fray and the price offered rises. There's a chance that the bidding will go much higher. At CFO.com, famed investor Michael Price, who owns a chunk of Dow Jones, says he thinks the bidding could go to $100 a share.
"A Black Day for Journalism"
Plenty of bloggers decried the prospect of Murdoch gaining control of the Journal. Dean Starkman, at the Columbia Journalism Review's CJRDaily, waved the flag for independent journalism. He pulled no punches in a piece entitled "The End of Dow Jones." He predicted that Murdoch's involvement in the Wall Street Journal would be a disaster for the paper. He writes: "Make no mistake: this is the end of Dow Jones." And then later: "And make no mistake: Tuesday was a black day for journalism."
The union representing the journalists at Dow Jones is vocally opposed to the deal. The Independent Association of Publishers Employees (IAPE), quickly slammed the offer and said workers "from top to bottom" oppose a sale to Murdoch. They're also leery of the premium, saying it "suggests only one recourse to make the acquisition profitable: gutting the enterprise and slashing the staff that make it the leading financial news organization." (See BusinessWeek.com, 5/2/07, "The Blogosphere Takes On Murdoch's Bid").
No Business Like News Business
Murdoch certainly isn't making his specific plans public. He has said that he's a big believer in newspapers and particularly business news, which he predicts will be one of the fastest-growing categories. He's also starting a business news television channel and sees opportunities to integrate the Dow Jones talent into the operation.
It may not be Murdoch who ends up getting control of Dow Jones. But the blogosphere thinks the company is likely to get sold. BusinessWeek's own Jon Fine and Tom Lowry argue about many aspects of the deal, except for the fact that "the days of Dow Jones being an independent company are over." )