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GE, Pearson race to ready Dow Jones bid

The companies would present an offer to counter News Corp.'s.

June 19, 2007|Joseph Menn and Meg James | Times Staff Writers

Negotiators for General Electric Co. and Britain's Pearson stepped up efforts Monday to form a rival bid for Wall Street Journal publisher Dow Jones & Co. as an alternative to billionaire Rupert Murdoch's $5-billion offer.

Four people familiar with talks said Monday that the companies were moving quickly to determine whether they should put together a bid that would pool GE's CNBC cable television channel with Pearson's Financial Times, the top English-language rival to the Wall Street Journal's business journalism.

"This was the first day where a lot of ideas were exchanged and discussed," said a person briefed on the proceedings, which included bankers and business-development executives.

Under one scenario being discussed Monday, GE and Pearson would each get about 40% of the new company, with members of the Bancroft family that controls Dow Jones keeping the balance.

Pearson took the idea to NBC Universal, the GE division that manages CNBC, last week. NBC Universal Chief Executive Jeff Zucker and CNBC President Mark Hoffman then made a proposal to GE Chief Executive Jeffrey Immelt, who told them to "take a look at it," according to one executive.

"NBC's interest in it is serious," that person said. "It's an attractive acquisition for whomever gets it."

Murdoch's News Corp. hopes to use the Journal's assets in launching a rival business cable channel to CNBC.

Like Murdoch, NBC is especially interested in the digital side of Dow Jones, which includes electronic newswires, the Journal's subscription-based websites and MarketWatch, a free financial news site.

An advantage to GE is that the industrial and media giant wouldn't have to put up much, if any, cash because its contribution to the deal would be CNBC, which has a substantial capital value and generates about $250 million a year in profit.

GE and Pearson haven't progressed enough to approach the Bancrofts and gauge their interest, the people said, who asked not to be named because discussions were confidential.

Still, the talks are expected to reach a conclusion quickly.

"This isn't going to linger," one executive predicted, and another said a decision could come this week.

GE, NBC and Dow Jones declined to comment, while Pearson didn't return messages.

The negotiations began as the Bancrofts continue to discuss journalistic demands they will make of Murdoch when talks on his bid resume. The family wants to create a board to stop Murdoch from directing journalists to write about, or refrain from writing about, stories that affect his business interests.

"The family members and their advisors are continuing to work on the proposal for a structure aimed at ensuring the editorial independence and integrity of the Journal and its sister publications," said Bancroft spokesman Roy Winnick.

It is unclear whether the family would make a similar demand of a rival bidder.

Some family members have said that a draft proposal from last week was too weak. It called for a five-member committee, with three of the members jointly appointed by Murdoch and the Bancrofts. But Winnick said the family didn't reject that draft, and that the document was simply continuing to evolve.

Analysts believe the Bancrofts would rather sell to the owner of the Financial Times, which enjoys a reputation for stronger journalism than most News Corp. outlets, which include Fox News and the New York Post. They might even be willing to settle for less than Murdoch's $60 a share offer, which represents a 65% premium over where Dow Jones stock had been trading.

A Pearson-GE combination with Dow Jones would unite two of the most widely read financial newspapers with CNBC and Pearson's interests in the Economist magazine and other publications. It could provide CNBC with new sources for information and keep them from News Corp.'s new channel.

Analysts still see the idea as unusual for GE, which is renowned for strict cost controls and rarely enters a venture it doesn't control.

"If they can do this with minimal investment and get maximum content, they might get by their muster," said industry analyst Ed Atorino of Benchmark. "But this is a disciplined bunch of guys."

Richard A. Dorfman, managing director of New York-based Richard Alan Inc., a boutique investment firm focusing on media, was skeptical that the Bancrofts would be satisfied with a Pearson-GE joint venture.

Some Bancrofts might be able to sell their shares. Those that didn't would be trading their Dow Jones shares for a far less liquid investment that likely would provide lower dividend income, he said.

Dorfman predicted that the end result would be a sale to the highest bidder, most likely Murdoch.

"He didn't come to this dance to not go home with Dow Jones," Dorfman said.

Shares of Pearson fell 8 cents Monday to 17.13, GE dropped a nickel to $38.07, News Corp. slipped 34 cents to $23.62 and Dow Jones rose 2 cents to $59.03.

Times staff writer Thomas S. Mulligan contributed to this report.

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