Murdoch Closes In on Dow Jones Deal, `Crowning' Feat (Update2)

By Cecile Daurat and Leon Lazaroff

June 25 (Bloomberg) -- News Corp. Chairman Rupert Murdoch may be poised to complete his pursuit of Dow Jones & Co., landing the most prestigious trophy in a five-decade career as a dealmaker: the Wall Street Journal.

With General Electric Co. and Pearson Plc out of the bidding, Murdoch faces no serious challenges to his $60 a share offer. Negotiations, dormant most of this month, restarted June 22 when News Corp. received a proposal from Dow Jones to protect the New York-based publisher's editorial independence.

``An acquisition of Dow Jones could be considered a crowning achievement to a spectacular career,'' said Richard Dorfman, managing director at Richard Alan Inc., a New York investment company. ``Murdoch gets an iconic journalistic brand.''

The Journal, the second-largest U.S. newspaper in circulation, would give the 76-year-old Murdoch instant clout in U.S. financial news. He also would get material from the weekly Barron's magazine and Dow Jones Newswires to fill his 110 newspapers and a planned Fox Business Channel.

Dow Jones's board last week took the lead in negotiations from the Bancrofts, who control 64 percent of the company's voting stock. That move was intended to speed progress on the talks, while leaving the family with final say on an agreement.

Murdoch's chances improved after General Electric and Pearson dropped plans for a bid on June 21. ``There's a higher probability a deal will be completed,'' said Michael Morris, an analyst at UBS AG in New York who rates News Corp. ``buy.''

Shares Drop

Shares of Dow Jones fell 31 cents to $58.49 at 10:21 a.m. in New York Stock Exchange composite trading, down from $60.65 the day before GE and London-based Pearson, owner of the Financial Times, dropped out.

The decline below $60 indicates traders no longer expect a higher offer from Murdoch or another suitor. The News Corp. bid was 65 percent more than the stock's price before it was made public on May 1.

The offer represents almost 40 times Dow Jones's projected 2007 earnings and values the company higher than Google Inc. Google, the owner of the world's most-used search engine, trades at about 35 times projected 2007 profit.

Class A shares of New York-based News Corp., also owner of the Fox television network and cable TV's Fox News, rose 19 cents to $21.80 and are unchanged this year.

Possible Hitch

A remaining hitch may be a Dow Jones proposal to ensure the editorial independence of the Wall Street Journal. Last night, the New York Times reported that News Corp. and advisers representing Dow Jones and the family were near an agreement on a plan that would establish a five-member committee to oversee the hiring of the managing editor and editorial page editor. The committee would be mutually chosen by News Corp. and the Bancrofts.

Dow Jones last week had proposed a seven-member committee, with two representatives each from News Corp. and the Bancrofts, and three chosen by the family and approved by News Corp.

Murdoch found that proposal ``wholly unacceptable,'' the New York Times reported on June 23, because an oversight committee would have had the power to oversee budgets and the appointment of the publisher. The proposal also called for limits in how News Corp. could use the Wall Street Journal brand.

News Corp. spokesman Andrew Butcher declined comment today. Bancroft family spokesman Roy Winnick and Dow Jones spokeswoman Linda Dunbar didn't immediately return calls seeking comment.

Dow Jones would bolster News Corp.'s planned financial news channel and help lure advertisers from Fairfield, Connecticut- based GE's CNBC, said John Morton, an independent newspaper analyst in Silver Spring, Maryland.

CNBC Contract

Dow Jones and CNBC compete with Bloomberg LP in providing financial news and information. Fox Business Channel, scheduled to start this year, will compete with Bloomberg TV.

To use its material on his business channel, Murdoch may need to buy out the Wall Street Journal's contract to share content with CNBC through 2012, said UBS analyst Morris. Murdoch also plans to invest in the Wall Street Journal's expansion, which may include markets such as the U.K., Morris said.

Murdoch started with one newspaper, the Adelaide News in Australia, after his father's death in 1952. He bought and formed newspapers, becoming the largest publisher in Australia.

The empire expanded to the U.K. in the 1960s with the acquisition of the News of the World and the Sun. News Corp. also owns the New York Post in the U.S., a Hollywood film studio and a satellite-TV business in Asia.

Telerate Blunder

In the 1981 purchase of the Times of London, Murdoch consented to an autonomous editorial board with power to approve the hiring or firing of top editors. Murdoch has offered a similarly structured oversight board for the Journal.

Murdoch broke all the promises he made not to interfere at the Times, according to Harold Evans, who was named editor of the newspaper after Murdoch bought it. He left a year later.

``This board was meant to arbitrate disputes, but proved to be decorative, totally ineffectual,'' said Bruce Page, a former London Sunday Times reporter and author of ``The Murdoch Archipelago.''

A sale to Murdoch would be a capitulation for the Bancrofts, who sought to attract other buyers for the company it has controlled since 1902.

The family's hands-off approach insulated the Wall Street Journal from outside influence. The newspaper, second only to USA Today in circulation among U.S. newspapers, has won 33 Pulitzer Prizes, fourth after the New York Times, Washington Post and Los Angeles Times.

The company also made strategic blunders, such as the 1990 purchase of Telerate, a financial data provider, for $1.6 billion. Dow Jones sold Telerate in 1998 for $510 million.

`Never Recovered'

After 2000, budget cuts at technology companies hurt advertising revenue. From a peak close of $76.75 in June 2000, Dow Jones shares fell to $36.55 on April 30, the day before Murdoch's offer was disclosed.

``The Journal never recovered from that,'' Morton said. ``The stock price weakened the Bancroft family's resolution, particularly among the younger ones.''

The family initially rejected Murdoch's offer, then on May 31 opened the bidding to all suitors.

The only alternative to emerge is a proposal by Brad Greenspan, the MySpace Web site co-founder, to pay $60 a share for 25 percent of the company. Greenspan fought the sale of MySpace parent Intermix Media Inc. to News Corp. in 2005.

To contact the reporter on this story: Cecile Daurat in New York at cdaurat@bloomberg.net Leon Lazaroff in New York at llazaroff@bloomberg.net ;

Last Updated: June 25, 2007 10:27 EDT

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