Rupert Murdoch’s stunning offer for Dow Jones appeared to be slapped down late Tuesday, but the news only fueled speculation over whether the world’s biggest media mogul could pull off a blockbuster purchase.
On Tuesday morning Murdoch’s News Corp. made a $5 billion offer for a company that includes coveted assets such as the Dow Jones News Service, MarketWatch and, of course, the Wall Street Journal.
News Corp. offered a premium of nearly 70% over Monday’s closing price in an apparent attempt to box out competing bids.
Less than eight hours later, the controlling Bancroft family was said to be prepared to reject the offer.
But News Corp. said late Tuesday that its offer stands, raising the specter of a public fight and the question of whether Murdoch can actually pull it off. Earlier in the day, Murdoch said in a live interview on his own Fox News Channel that he was prepared to hunker down for a battle.
“There’s plenty of time,” Murdoch told anchor Neil Cavuto.
News Corp. is known to have been interested in Dow Jones for some time, but the Bancroft family, which controls about 60% of voting stock in Dow Jones, has been reluctant to sell.
The business climate for newspapers has changed dramatically in the past year. Owners have recently shown a greater willingness to part with their assets as forecasters offer bleak predictions about the business.
News Corp. is also thought to have the cash on hand, having not made a major purchase since summer 2005, when it spent slightly less than $600 million on MySpace.
And regulatory concerns over a deal are limited, since the only other U.S. newspaper News Corp. owns is the locally focused New York Post.
That left open the possibility that the Bancrofts could simply be holding out for a better price.
There’s a “fairly high likelihood of seeing a deal occur, better than any chance in recent history,” said UBS’ Brian Shipman in a conference call.
News Corp.’s bid also raised the possibility that other buyers could step in with juiced-up offers, though potential suitors such as the New York Times Co. have been enduring their own financial struggles, while private-equity investors are not thought to be interested in paying such a high multiple on earnings.
One potential candidate, Bloomberg, issued a statement late Tuesday that it was not interested in purchasing Dow Jones.
Media pundits are likely to worry over the prospect of Murdoch, whose assets are known to have conservative leanings, taking control of the Journal, which has a global circulation of 2.7 million and is already known for its conservative editorial page.
Still, the editorial page is run distinctly apart from the news department, and it’s unlikely Murdoch would have much interest in or incentive to change the larger culture of the paper.
A purchase would, however, raise another thorny question: what it would mean for one of the world’s largest moguls to control the Dow Jones Index, and thus be able to decide which companies comprise the benchmark.
Why Murdoch is so interested in shelling out $5 billion — about 7% of the value of News Corp. — was an intensely debated subject on Wall Street and in media circles on Tuesday.
Speculation focused on the impending launch of Fox Business Channel, which could draw from and give prominence to many of Dow Jones’ financial news outlets.
But the extent of the advantages were overstated; WSJ reporters and editors are limited in their appearances on any net besides CNBC, with which the newspaper has a deal through 2012. (Interestingly, details about Murdoch’s bid for Dow Jones dribbled out via CNBC reports all day Tuesday.)
The real answer may be more straightforward.
Murdoch is thought to have long coveted the Journal for both its business and prestige value. He also sees it as filling out a portfolio that includes broadsheets like the Times of London and the Daily Telegraph in Australia.
And Murdoch has praised the importance of digital media while negating Wall Street wisdom that newspapers are a dying business.
After divesting its piece of satcaster DirecTV to John Malone last monthMurdoch found himself in a position to make a bid.
The company does not have a global financial news service in place, but Dow Jones would complement, if not be fully integrated with, entertainment and social-networking sites like AmericanIdol.com, MySpace and IGN.
“We would hope with more resources and expanded coverage of many things, we would see that circulation increase,” Murdoch told Cavuto. “But more important is increasing on the Web, where more people are paying for it, and we would find millions of people around the world.”
At the very least, the move seemed calculated to shake up the dual structure of Dow Jones and other newspaper owners, which critics say keep control too tightly in the hands of the newspaper families.
Stock price of the New York Times Co., for instance, showed a bounce Tuesday as a result.
If the sale comes off, it would be a mega-deal in media terms: the world’s third-largest entertainment conglom buying the country’s second-largest newspaper.
Wall Street’s initial reaction to a possible sale was split: Dow Jones shares rose more than 50% in midday trading, leading to an automatic halt in trading. But News Corp. shares slipped 3% on the news.
A new owner would also have to tackle concerns from the newspaper’s union, which early reports pegged as being opposed to a deal.
Despite the investor hesitation, analysts generally praised the move.
“There are significant long-term advantages in our view,” BMO’s Jeffrey Logsdon said in an analyst note.
Dow Jones is undergoing a management transition: Last month, the company named M. Peter McPherson as the new chairman, replacing longtime chair Peter Kann. And the Journal named Marcus Brauchli as managing editor to replace the retiring Paul Steiger.
(Michael Learmonth contributed to this report.)