Lusting after the WSJ

'WE'D RATHER sell at $60 a share. If you know any buyers, send them my way." That was Dow Jones & Co. board member Roy Hammer, speaking to a Fortune magazine reporter two years ago, when stock in the Wall Street Journal's publisher was trading in the mid-$30s.

Shortly after Hammer's quote appeared in print, Donald E. Graham, chairman and chief executive of the Washington Post Co., dismissed Hammer's offer. "Of course he would take $60 a share," Graham told me. "You would have to be out of your mind to offer that much."

But when I mentioned the price to Rupert Murdoch a few weeks later, the News Corp. chairman's eyes lit up. "Sixty dollars, eh? How do we get it done?"

I was reminded of both comments this week when Dow Jones, whose stock was still trading in the mid-$30s, received an unsolicited offer from Murdoch to purchase the company -- at $60 a share. Some investment bankers, hoping to get a bidding war going, mentioned the Washington Post as a possible rival suitor. But much as he would love to own the Journal, I have trouble imagining Graham, a cautious steward, making a competitive bid.

Don't let Murdoch's willingness to pay 67% above market value for Dow Jones stock fool you. It's Graham, not Murdoch, who is living in the real world. The newspaper industry is in decline, and there is no easy way to bring it back. The Washington Post is one of America's best newspapers, but its circulation fell more than 11% between 2002 and 2006. On average, daily newspaper circulation fell more than 2% just from October to March, according to the Audit Bureau of Circulations. Meanwhile, the Internet is shredding newspapers' classified advertising franchise. Readers of The Times have witnessed the efforts of its parent, Tribune Co., to sell itself over the last six months as its declining earnings drove down the price.

So buying a newspaper company these days is a gesture of love, or vanity, or both. Eli Broad, the Los Angeles businessman and philanthropist who tried to buy The Times and then Tribune Co., has told friends that "newspapers are for rich guys who didn't get the football team." He is right, and Murdoch, whose News Corp. is big enough to swallow Dow Jones without a hiccup, is one of those guys.