News Corp. May Not Buy Dow Jones Without More Votes (Update3)

By Leon Lazaroff and Gillian Wee

July 30 (Bloomberg) -- Rupert Murdoch's News Corp. said it is ``highly unlikely'' to proceed with a $5 billion bid for Dow Jones & Co. without more support from the publisher's controlling Bancroft family. Dow Jones shares fell 5.3 percent.

The reported number of votes in favor of the deal isn't enough, a News Corp. spokesman, who declined to be identified, said in an interview. Murdoch needs support from family members holding about 30 percent of the voting stock and had almost 28 percent as of yesterday, the Wall Street Journal reported today.

Bancroft family members have until 5 p.m. to decide on the offer, a person with knowledge of the process said. The family, which controls 64 percent of Dow Jones's voting shares, are split about selling to News Corp. The deadline, set by family trustee Michael Elefante, follows three months of debate among the family and Dow Jones's board over whether Murdoch would try to influence editorial content at the Journal.

``It's a bit of a pressure tactic'' by Murdoch, said Richard Dorfman, managing director at Richard Alan Inc., a New York investment company. ``He's telling the Bancrofts who are in favor of the deal to bring family members on board. Maybe he wants more of what appears to be a friendly deal than an acrimonious deal.''

Murdoch's $60-a-share bid is a 65 percent premium to the stock price on April 30, a day before the offer was made public.

Shares of New York-based Dow Jones, owner of Dow Jones Newswires and MarketWatch, dropped $2.89 to $51.56 at 4:01 p.m. in New York Stock Exchange composite trading. Dow Jones shares have fallen 13 percent since July 6 as investors speculated the Bancrofts may oppose the sale.

Family Divided

Dow Jones spokeswoman Andrea Grinbaum declined to comment on the News Corp. comments. Bancroft family spokesman Roy Winnick couldn't immediately be reached for comment.

Class A shares of New York-based News Corp., which owns the Fox Television network and the London-based Times, rose 22 cents to $21.27 on the NYSE. They have dropped 1 percent this year.

Christopher Bancroft, an investment banker and board director, and his cousin Leslie Hill, also a director, oppose the deal. Bancroft has sought to attract hedge funds, private-equity firms and General Electric Co. to buy enough shares to block a deal with News Corp., the Journal reported on July 16.

Another Bancroft director, Elizabeth Steele, told family members the company would be better served as part of a larger media organization, the Journal reported. Murdoch has offered few specifics about his plans for Dow Jones and the Journal except to say its reporting and journalists would appear on News Corp.'s cable-TV networks in Europe and Australia.

`Wrenching Decision'

``It's got to be an absolutely wrenching decision for the family to make,'' said Hal Vogel, a New York-based media analyst. ``This deal is unique because the Bancrofts have tried to round up other buyers at the same price and they haven't come up with anyone.''

Jane Cox MacElree, a family trustee who owns about 15 percent of Dow Jones's voting shares, told family members at a gathering in Boston July 23 that she didn't want to sell to News Corp. because the Journal's independence might be compromised under Murdoch, the newspaper reported, citing unidentified people familiar with the matter.

Murdoch's bid is opposed by the newspaper's employees' union and by James Ottaway Jr., whose family controls 6.2 percent of the company's voting rights.

Murdoch agreed in late June to create a five-person board to oversee the hiring and firing of top Journal editors, people briefed on the plan said at the time.

The board hasn't assuaged all Bancroft family concerns about Murdoch acquiring the Journal and Dow Jones's other news operations, said John Morton, an independent analyst based in Silver Spring, Maryland.

Conflict of Interest?

``I don't think anyone believes that in the long run News Corp. as owner won't do with Dow Jones what it wants,'' Morton said. ``The Journal is the newspaper that's supposed to report on corporate America, and once it's owned by corporate America, there's an inherent conflict of interest there.''

Murdoch broke guarantees of editorial independence after he bought the London-based Times, according to the book ``Good Times, Bad Times'' by Harold Evans, whom Murdoch named editor of the Times in 1981. Evans left a year later after a falling out with Murdoch. Evans's book contained ``a tremendous number of inventions,'' Murdoch told the Journal in an interview last month.

To contact the reporter on this story: Leon Lazaroff in New York at llazaroff@bloomberg.net ; Gillian Wee in New York at gwee3@bloomberg.net .

Last Updated: July 30, 2007 16:19 EDT

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