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Dow Jones bid runs into snag

A trust representing one branch of the Bancroft family says Murdoch's offer isn't high enough.

July 28, 2007|Joseph Menn | Times Staff Writer

Rupert Murdoch's quest to gain control of the Wall Street Journal suffered a serious setback Friday when a trust controlling 9% of the shareholder votes in the newspaper's parent said it would vote against the media mogul's takeover offer.

The trust, controlled by Denver attorneys on behalf of a branch of the Bancroft family, had been seen as favoring the $5-billion deal for Dow Jones & Co. But people tracking the behind-the-scenes tallying of the vote said the Denver trustees decided to hold out in hope of getting more money for their stake.

"They are not opposed to a sale, but sought a higher price," one Murdoch supporter said.

It appears that as much as 45% of the shareholder vote now is in opposition.

With other members of the Bancroft family deeply divided on whether to sell at all, Friday's action raised the odds that Murdoch's News Corp. wouldn't get enough backing from the heirs of the clan that has owned Dow Jones for more than a century.

Through their ownership of Class B shares, which have 10 times the voting power of publicly traded Class A shares, the Bancrofts and another family, the Ottaways, have 70% of the say at Dow Jones.

The Ottaways, with about 6% of the total vote, and two Bancroft branches with about 15% each have already indicated their opposition. A 23% stake is controlled by William Cox Jr., who is conflicted but has been favoring a deal, according to people involved in the process.

Since Murdoch's offer of $60 a share is a 65% premium over the stock's trading price before he acted, support from the 30% of the vote belonging to Class A shareholders has long been assumed. That math means Cox's backing alone could be enough to seal the deal.

But the potential margin in Murdoch's favor became so small with Friday's reversal that some opposed to the deal were discussing a campaign to persuade Class A shareholders to oppose the offer. They said even a percentage point could make the difference.

Michael Elefante, the Boston lawyer who sits on some of the largest trusts holding Bancroft shares, hopes to have a full picture of where the family stands by Monday.

Elefante and Dow Jones declined to comment. A News Corp. spokesman and the lawyers controlling the Denver trust didn't return phone calls.

Another factor working against Murdoch was that he would need a majority of the votes from all outstanding shares to take Dow Jones, not simply a majority of the votes cast. It is unlikely that all small Class A shareholders will bother to vote.

Murdoch has indicated that he won't raise his offer and that he wants a comfortable margin of support from the Bancrofts before continuing the purchase process. That suggests he might walk away rather than wrangle over Class A votes.

The Dow Jones board has endorsed the deal, concluding that the company would be better served by allying with a major media power like News Corp., which owns newspapers, satellite television operations and the Fox broadcasting and cable networks.

However, some of the Bancrofts and many in the Journal newsroom are reluctant to turn over the world's top financial publication to a media baron known for sensationalism and who they worry would allow his business and political interests to influence coverage.

If the battle for votes moved to common shareholders, some Journal reporters said Friday that they would be helped by the Denver trust's position that $60 a share was too little. Rather than engage in a debate only about journalistic ethics, they said, now they would have more support to argue that alternative strategies being discussed by the Bancrofts could boost the share price.

"Even the most die-hard sell-outs now agree that Rupert is trying to buy too low," one Journal writer said.

Dow Jones shares rose 98 cents to $54.70.

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