News Corp. Offers $60/Share for Dow Jones

Dow Jones & Company shares are up 52% to $55.30 on a CNBC report that News Corp. has made an unsolicited buyout bid of $60/share. The report has been confirmed by Dow Jones in a press release. News Corp., controlled by Rupert Murdoch, is said to have proposed the acquisition in a letter to the Dow Jones board two weeks ago. Dow Jones is the publisher of the Wall Street Journal, Dow Jones Newswires and Indexes, Barron's, the Far Eastern Economic Review and MarketWatch. It also owns Factiva and co-owns SmartMoney with Hearst Corp. The Bancroft family, which controls Dow Jones with about 62% of voting stock, has hired advisors to help them weigh their options.

While the offer has not been rejected, in its statement Dow Jones said "there can be no assurance that this evaluation will lead to any transaction." CNBC's David Faber: "It is not a family that acts monolithically, given the controlling voting stake is held by as many as 20 separate members of the Bancroft family. If Dow Jones' board of directors believes there is enough support amongst members of the family to consider a sale, it is likely to begin a process to do just that."

Michael Price of MFP Investors, which owns 351,000 Dow Jones shares, said: "Murdoch sees the potential of tremendous economics of scale putting the news organizations together. If true, this really would be unbelievable." New York Daily News publisher Mort Zuckerman called the offer a "brilliant move." CNBC commentator Jim Cramer says Murdoch called him in 1996 when Dow Jones was trading in the $40s and asked if he should make a $73/share offer. Cramer told him at the time the family would reject the offer, but says that given the current climate, "he has a shot of pulling it off."

Faber says Murdoch has a deep desire to incorporate Dow Jones and its prized property, the Wall Street Journal, into his media empire. News Corp. is expected to begin a business news channel, Fox Business, to compete with CNBC later this year; adding Dow Jones would definitely help those efforts, he said. CNBC currently has a partnership with Dow Jones until 2012. He also said Bloomberg "easily has the financial muscle to borrow the funds necessary to make a bid" for the company, which he called, "a trophy property that, if it is for sale, will not likely be available again." Wall Street Journal says the offer "could set off a bidding war for Dow Jones... Possible rival suitors include the Washington Post Co., the New York Times Co. and possibly even Bloomberg LP." Dow Jones reiterated earnings forecasts of 25%-40% earnings growth, despite a generally weak outlook for the newspaper sector. Its shares were halted after the initial news, but have since reopened; they were down 4.4% on the year before today. News Corp. shares are down 2.5% to $23.40.

Sources: Press release, CNBC, MarketWatch, Bloomberg
Commentary: Murdoch To Buy Dow Jones? • Dow Jones Capitalizing on the Changing Media Market • Holy Cow! News Corp. Lobs Hostile Bid for Dow Jones [IP & Democracy] • News Corp. Offers $5 Billion For Wall Street Journal [WIRED Blog]
Stocks/ETFs to watch: Dow Jones & Company Inc. (DJ), News Corp. (NWS)
Earnings call transcripts: Dow Jones Q1 2007, News Corporation F2Q07
Related: Video: Cramer on News Corp's Dow Jones Bid [CNBC], News Corp. Business Channel to Launch in fall, Murdoch Says [CNBC]

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Comments

[David Jackson:]

Interesting that this is also pushing up the stocks of other newspaper companies with little online presence or financial content. I'm not sure that makes sense, because Dow Jones has unique content, powerful brands, excellent management and a significant online presence, factors which are not necessarily true for some of the other newspaper stocks.

2007 May 01 01:29 PM

[SA Editor E...:]

Please see this short summary of current movement in newspaper stocks:

Newspaper Stocks Climb on Dow Jones Bid -- media.seekingalpha.com...

Note that the stocks are up 3-4% vs. Dow Jones' 50%+.

2007 May 01 01:44 PM