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Murdoch reels in his prize

How the Dow deal really came together

Rupert Murdoch is being touted as a master dealmaker for his ability to snatch Dow Jones from the reluctant hands of the Bancroft family.

But the acquisition may have been helped along by a number of other factors.

The Denver branch of the family, which controlled 9% of critical swing votes, was a lot more amenable to bagging a few extra dollars than most reclusive wealthy families might be: Reps told News Corp. execs in a latenight negotiating session that a payment of $30 million-$40 million in legal and advisory fees would win their support.

While it wasn’t a “bribe,” as some zealous bloggers put it, the deal was an unusual — and unusually small — sum paid to secure an eleventh-hour deal. The amount was barely one-twentieth of 1%of the price of Dow Jones (and about what Murdoch paid for the entire New York Post in 1976).

More importantly, the money went only to the Bancroft family and was not spread around to shareholders — a convenient way for Murdoch to win votes without raising his overall bid, which insiders said he wasn’t prepared to do.

Meanwhile, many of the Bancroft family advisers, including Goldman Sachs and Merrill Lynch on the banking side, had their own reasons to lobby for Rupe.

Since investment banks are paid the bulk of their fees only if a deal gets done, the parties had incentive to make a sale, no matter to whom. When it became clear that Murdoch, with a surplus of cash and an atypical love of newspapers, was the only exec who could deliver one, they pushed hard for him.

Also riding the family was Dow Jones CEO Rich Zannino — possibly because he didn’t want to alienate his likely new boss.

The clincher for Murdoch was getting the Bancrofts to agree to just a five-member editorial-integrity board.

As it turns out, only one of the five, OpinionJournal.com contributor Thomas Bray, even has editorial experience. And the board’s credibility wasn’t bolstered by the news Aug. 2 that one of the members, new-media guru Nicholas Negroponte, runs a foundation that has received a $2.5 million grant from News Corp.

A scan of the agreement shows an excessive amount of legalese that could undermine its power.

“Whereas, pursuant to the Merger Agreement, each of the Company and Dow Jones is required to adopt, execute and deliver, and comply with, and cause its subsidiaries, as applicable, to comply with, this Agreement,” it says.

Then again, when it came to some of the Bancrofts, compliance proved to be the name of the game.

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