Rupert Murdoch put the finishing touches on his $5-billion takeover offer for Wall Street Journal publisher Dow Jones & Co. on Monday, people familiar with the matter said.
The billionaire media mogul met with Dow Jones Chief Executive Richard Zannino for lunch at the New York headquarters of Murdoch's News Corp. to discuss his offer. They then told their respective subordinates that the deal was on track, people briefed on those conversations said.
The Journal reported late Monday that the deal would be put to the full Dow Jones board tonight for its approval.
The board is likely to back News Corp.'s offer, contingent on getting approval from the extended Bancroft family, which has controlled Dow Jones for more than 100 years.
But even as Zannino and Murdoch moved to discuss the final price and other terms of the transaction, opponents rallied around heir Christopher Bancroft's plan to buy up enough of his relatives' shares to block the deal.
Supporters of the Texas investment manager said he might need little more than $300 million to thwart a sale to Murdoch, a far cry from what the mogul has offered. Dow Jones shares dropped 54 cents Monday to $56.95.
But Bancroft's strategy remained in flux and fraught with risk. Even if several hundred million dollars were committed to the cause, it might not be enough, depending on what legal wording governs which of about 40 trusts that contain the Bancroft family's shares.
In addition, Christopher Bancroft could ratchet up the tension among the three dozen or so adults in the family if a large number demand a payment equal to Murdoch's offer of $60 a share. It is unlikely that Bancroft would have the money to accommodate all of them.
If Bancroft succeeds in getting the shares and blocking the sale, the value of the stock is likely to plummet by as much as two-thirds, to where the shares traded before Murdoch's bid, because traders have been anticipating a deal at the Murdoch offer price. That is why hedge funds and others have been reluctant to lend Bancroft the money he needs for the gambit.
"It seems like a formula for a lot of unhappy people," said an advisor for another party in the intrigue.
But Bancroft is expanding his discussions with others, including Los Angeles Internet entrepreneur Brad Greenspan, who previously joined billionaire supermarket king Ron Burkle in floating a plan to buy back some of the Dow Jones shares owned by family members. Burkle has been advising a union representing many Dow Jones journalists.
"I am, with my investment group, looking into this and definitely having discussions with different members of the Bancroft family," Greenspan said. "We're really interested in this transaction, in any way that we can get to participate in owning shares and getting some of these strategic plans in place."
Greenspan is expected to give more details of his plan to Dow Jones representatives today. In addition to the share buyback, he wants the company to borrow more and invest to promote video and other new offerings.
Besides the Journal, Dow Jones owns MarketWatch.com, Barron's and Dow Jones Newswires.
Christopher Bancroft and some other members of his family have objected to combining the Journal with News Corp. Critics decry sensationalism in New Corp.'s British tabloids and the New York Post, and the conservative bent of its Fox News Channel. They are also concerned that Murdoch will steer news coverage to serve his business interests, a fear that Murdoch has rejected as baseless.
Bancroft's approach hinges on the theoretical support of Bancroft family member Jane MacElree and the family of Jim Ottaway Jr., who sold a small chain of papers to Dow Jones. Ottaway has criticized the idea of selling the top U.S. business publication to Murdoch, while MacElree's daughter, Leslie Hill, has urged the Dow Jones board to listen to Burkle and Greenspan and consider other options.
The Bancroft family trusts are the primary owners of about 20 million Class B shares, which would get 10 votes apiece on any sale of the company. With about 64 million commonly traded Class A shares having a vote apiece, Dow Jones stockholders as a whole have about 264 million votes.
Adding together the Ottaway holdings and the 11 Bancroft trusts that have either MacElree or Christopher Bancroft as trustees, there are 80 million shares that might oppose a Murdoch deal.
That means Bancroft and his allies theoretically need only 52 million more votes to get to 132 million, or half of those outstanding. At $60 apiece for 5.2 million Class B shares, that's just $312 million.
The calculation falls somewhere short of solid, primarily because some of the MacElree/Bancroft trusts don't need a unanimous vote of the trustees before backing a transaction. MacElree and Bancroft could oppose a deal at one trust but get outvoted by fellow trustees who are bound to represent all the beneficiaries of that trust.
Murdoch could also buy up Class B shares himself, although that stock would then lose its super-voting power.
Dow Jones, News Corp., Christopher Bancroft and a spokesman for the family all declined to comment.