Reaches agreement with News on board

Rupert Murdoch on Tuesday took a giant step toward adding the Wall Street Journal to his vast portfolio.

Dow Jones and News Corp. have come to terms on a deal that would create an independent board to oversee the Journal and the hiring of its editorial toppers should an acquisition go through.

Agreement removes the biggest stumbling block in Murdoch’s $5 billion bid to own the financial-news company, though the plan must still be approved by the controlling Bancroft family.

The Dow Jones board, which contains a number of family members, will now return to convince the skeptics among the Bancrofts that a sale would not jeopardize the news integrity of the Journal. Boston attorney and board member Michael Elefante is thought to be the Bancroft rep who will take the lead in those talks.

The Bancrofts last week turned over negotiating power to the Dow Jones board, but some of its members are still thought to be ambivalent about the News Corp. bid.

If the Bancrofts approve the plan, negotiations would then move to the subject of price. Those talks are expected to go more smoothly than the discussions over the editorial board; Murdoch’s $5 billion bid reps a significant premium over the company’s share price at the time of the offer.

Without a competing bidder, experts say a major change of heart or a dramatic internal coup within the family would be the only stumbling blocks to a sale.

The issue of editorial oversight has polarized the Bancroft family and, until last weekend, threatened to derail the talks.

When the family, via the Dow Jones board, returned a plan that was fundamentally similar to one floated earlier in the month, Murdoch was said to be exasperated.

But Dow Jones and News Corp. worked through the weekend and into Tuesday to reach a compromise.

The current agreement is expected to split the difference on the original Bancroft plan, which would have allowed News Corp. to nominate just two of seven members of the independent board, and Murdoch’s proposal, which would have given it control of at least half a panel of 16.

Those with knowledge of the plan say it is similar to the arrangement at News Corp.-owned the Times of London, in which the board also has oversight of key editorial positions.

But late Tuesday critics of the deal were still warning against premature judgments.

“The Bancroft family’s consensus from Friday to Murdoch was that the only way we’ll sell you the paper is if you can’t run it,” said Steve Yount, who oversees the union that reps more than 2,000 Dow Jones staffers. “What changed between Friday and today?”

Yount intensified his call for the Bancroft family to turn down the offer, comparing the current decision to that faced by Boston Red Sox owner Harry Frazee before he sold Babe Ruth to the Yankees. “Boston hated him forever. Do the Bancrofts want that?”

A number of critics have also emerged to question issues unrelated to integrity. On Tuesday, media consultant Norman Pearlstine had harsh words for the wisdom of the Murdoch bid.

“I don’t get it from a financial point-of-view,” he told a PricewaterhouseCoopers confab in Gotham. “The value of the brand is vastly overstated by the people who read the Journal and don’t have to run it.”

A prospective buyer would have trouble mining the brand on television, Pearlstine said. News Corp. is thought to want to use the paper and the rest of Dow Jones as a way to jumpstart its Fox Business Channel cabler, set to launch soon.

Pearlstine, who has been examining media mergers since leaving his post as editor in chief of Time Inc. in 2005, said that a similar News Corp. acquisition in the U.K., the purchase of the Times of London, did little for that paper in its battle against the Financial Times. Instead of driving it to profit, it simply helped the Times go from losing money to breaking even — a move that didn’t justify the purchase price. “Just because you want a drink doesn’t mean you have to buy the whole bar,” he quipped.

Also Tuesday, a subplot developed between the country’s two leading papers.

The Wall Street Journal has been in the odd position of reporting many scoops, some possibly leaked by the News Corp. camp itself, as the bid saga has unfolded.

But the New York Times, missing out on the year’s biggest media stories, fired back with a series investigating the “Murdochracy” that sought to uncover the vast holdings and history of Murdoch’s News Corp., including on Tuesday an exploration of the company’s recent efforts in China.

But instead of declining comment for the story, News Corp. responded with fiery comments that the Times included in the piece, calling the series a “malicious assault” that was “blatantly designed to further the Times commercial self-interest.”

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