Is Rupert Murdoch Overpaying For Dow Jones?

While the market debates which way it wants to go, one thing is for certain, M&A activity has slowed down these past couple of weeks. It became routine to turn on the television and see company “X” has taken over company “Y”. But the offer I am keeping a close eye on is Rupert Murdoch’s News Corp’s (NWS) 5 billion dollar bid for Dow Jones (DJ).

The debate that is going on in my mind is whether Murdoch is overpaying for Dow Jones. The first thought that came to mind when I heard the offer on television was a) Murdoch is paying too high of a premium b) investment return on Dow Jones’s newspaper assets (Wall Street Journal and Barron's) are sure to decline as time passes.

At a 5 billion market cap Dow Jones trades 14 times earnings (ttm) and 33 times estimated 2008 earnings! Similarly, Google (GOOG) currently trades at 26 times estimated 2008 earnings. So what is wrong with the picture? Google’s earnings are growing at an expeditious pace while Dow Jone’s growth rate is “ho-hum.”

On the other hand, it is tough to put a value on the Wall Street Journal. I mean, it is the Wall Street Journal. The Wall Street Journal is the second most important newspaper only behind the New York Times (NYT) and without a doubt the most important financial news source in the world. In the meantime, I can only guess at what happens next while waiting for the outcome.

Disclaimer: I do not own any of the companies mentioned in this post.

Comments

[Al Capital:]

Murdoch's takeover bid for DJ and the WSJ is not simply based on the income projections from these unites, but rather a strategic need to strengthen the Murdoch news organization which according to one survey was perceived to be not believable by the public.
see:

mnrtrading.blogspot.co.../

2007 Jun 15 10:40 AM

[Sr. Pessimist:]

Well, now that Murdoch has purchased the Dow Jones, it's time to disregard any objective credibility the Wall Street Journal may have had in the past. Anything he touches he intentionally dirties to further his own business interests. But that's fine. Other news sites could pop up and time that don't play that tune...

2007 Aug 19 10:10 PM

[Sr. Pessimist:]

*any time

Dur. Me bee rong about stuff much times, but me always be correcting me when me kan. Aftur a long wile, me tend t2o beye mowore riyight than utherz at some stuff.

2007 Aug 19 10:12 PM