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Murdoch's path to Dow Jones eases

June 22, 2007|Thomas S. Mulligan | Times Staff Writer

NEW YORK — Advantage Rupert.

With General Electric Co. and Pearson taking themselves out of the bidding Thursday for Dow Jones & Co., billionaire Murdoch's path to landing the parent of the Wall Street Journal is further cleared.

GE, owner of NBC Universal and its CNBC business-news cable TV channel, and Pearson, the London-based publisher of the Financial Times, had discussed combining those businesses with the Journal in a partnership that would allow Dow Jones' controlling shareholders, the Bancroft family, to retain a minority interest.

But the two companies couldn't make the numbers work, leading GE to release a statement saying they "have decided not to pursue this combination." The Fairfield, Conn.-based conglomerate did say it would continue working with Pearson "to discuss cooperative agreements between CNBC and the Financial Times Group."

It's not clear that GE was ever enamored of the idea of partnering to buy Dow Jones. The company and Pearson never reached the point of making a bid to counter the $5-billion, $60-a-share offer from News Corp., the media colossus Murdoch controls.

"The economics just didn't work out," said a person familiar with the discussions who declined to be identified because he had not been authorized to speak. There also were "questions about structure, governance and the valuations," he said, referring to the value of the assets the partners would contribute.

Along with publishers Washington Post Co., New York Times Co. and Gannett Co., GE had been regarded as a potential strategic bidder because of its ownership of CNBC.

CNBC's dominant position in television business news is facing a threat from News Corp. Murdoch plans to launch a business news channel, a key motivation for his pursuit of Dow Jones.

However, CNBC has a content-sharing arrangement with the Journal that extends to 2012, which apparently would postpone News Corp.'s use of the Journal's name and talent for its own channel.

None of the major newspaper companies has expressed an interest in bidding. That leaves a group of long shots -- Los Angeles grocery magnate Ron Burkle, Philadelphia advertising entrepreneur Brian Tierney and MySpace co-founder Brad Greenspan -- as the only other parties who have publicly expressed an interest in Dow Jones.

John Puchalla, an analyst with Moody's Investors Service, said Murdoch's clear advantage is that News Corp. has the cash to do the deal and has promised to invest in Dow Jones' properties, which include Barron's and the MarketWatch website. Others would have to borrow heavily, Puchalla said, which would limit their ability to invest in the assets and, indeed, might make it necessary to cut costs.

The GE-Pearson withdrawal "doesn't make it a done deal for Murdoch, but there really aren't many viable options out there," said John M. Eade, president of Argus Research in New York.

Shares of New York-based Dow Jones slipped 94 cents to close at $59.71 on Thursday. News Corp. shares were up 11 cents to $23.71.

Some Bancroft family members continue to oppose selling to Murdoch because they regard him as a meddler in editorial affairs and fear that he would tarnish the Journal's reputation.

But the richness of his offer -- 65% above where the shares closed April 30, the day before the bid was made public -- has made it difficult to find alternatives and brought heavy pressure on the Bancrofts from outside shareholders and some family members.

On Wednesday, the Dow Jones board, which includes four family representatives, said it would take charge of negotiations over the company's strategic options. The move was expected to speed up the pace of talks and raise News Corp.'s chances of ultimately acquiring Dow Jones.

The Bancroft family's effort to craft a mechanism to protect Dow Jones' editorial independence was seen as bogging down the process. Family members turned over a draft of their plan at a regular board meeting Wednesday and left it to the board to decide how to fine-tune it and incorporate it into a sales agreement, if a deal was struck.

Dow Jones said Wednesday that the Bancrofts, who control 64% of the shares' voting power, "reiterated that any transaction must include appropriate provisions with respect to journalistic and editorial independence and integrity."

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