January 25, 2023
Murdoch Wants Dow Jones, Deal Would Beef Up Fox Business Channel
- by Wayne Friedman , May 2, 2007
The bid, which rocketed up Dow Jones stock price 65% from Monday's close, caused the New York Stock Exchange to temporarily halt the company's trading as the stock approached the $60-a-share level, which is the price of the News Corp. bid.
The company closed Tuesday at $56.20, up nearly 20 points--rising 55% that day. Dow Jones stock had been trading as low as $32.16 over the past 52 weeks.
Initially, analysts viewed the move as a sort of friendly offer. It would need to be, given that the Bancroft family controls 62% of the company, which has owned the publisher since the 19th century. But late Tuesday, a company statement reported that the family will vote more than 50% of its shares against the deal.
While News Corp. has wide-ranging media assets, the prize asset, The Wall Street Journal, could give the new Fox Business Channel some much-needed editorial gravitas. The channel is set to launch later this year.
With The Wall Street Journal under its wing, the new network would give industry leader CNBC a run for its money. It could speed up distribution deals among cable operators, as well as draw upscale audiences. As a result, upscale advertisers would follow, effectively bolstering the Fox News Channel.
"The Wall Street Journal would give a lot of credibility for Fox," says Dennis McAlpine, managing director of McAlpine Associates. "At the same time, Murdoch could push The Wall Street Journal to make it more like Fox News."
The issue of influence could be another major hurdle. A few hours after the bid, the Journal's editorial union roundly rejected it, because of Murdoch's somewhat stormy history with unions and editorial at his other newspapers in the U.K. and Australia.
Should the controlling Bancroft Family reconsider, it would walk away with some $1.5 billion--which money analysts say the family may never see again, considering the sluggish newspaper advertising climate and poorly performing newspaper stocks over the last several years.
The $60 a share News Corp. is offering is higher than Dow Jones' stock price over the last five years. While other newspaper stocks were active yesterday, analysts say only one or two newspaper brand names can command a high price value.
"Remember there is only one Wall Street Journal," says McAlpine. "The only other brand that could command that value is possibly The New York Times."
Analysts estimate the deal would come in at a pricey 15 times estimated 2007 earnings before interest, taxes, depreciation and amortization--much higher than the average 8 to 10 times valuation for newspaper companies.
All this has brought out other media companies to the party--especially those looking to protect their existing businesses. Other potential bidders include The New York Times, which could face an increased print ad threat, as Murdoch already owns the New York Post. Adding the Journal would give the company a strong position, especially in New York.
Bloomberg Business News was rumored to be another bidder. But the business information company quickly dismissed the idea that it was interested in Dow Jones. General Electric could be another contender--looking to protect the dominant position of its own TV business channel, CNBC, which ironically was co-owned by Dow Jones a few years ago. Dow Jones still provides some editorial content to CNBC.
CNBC's status would change if the company were sold and become a key piece of the new Fox Business Channel. Still, Murdoch may not get the benefits immediately. Dow Jones has an editorial contract with CNBC that runs until 2012.
Perhaps the most interesting suggestion by some stock-market analysts could be a bid by Google. Considering its recent entry into selling newspaper, radio and now TV advertising, some believe Google to be the perfect buyer--an Internet company looking to obtain powerful but undervalued traditional media content ripe to be transformed into the digital media world.
