Murdoch's Letter May Help Win Over Wary Bancrofts (Update1)

By Cecile Daurat

May 15 (Bloomberg) -- Rupert Murdoch's pledge to protect the independence of the Wall Street Journal may help convince the least-reluctant members of the family that controls Dow Jones & Co. to support his $5 billion bid.

In a letter sent May 11 and disclosed yesterday, Murdoch promised the Bancroft family an autonomous editorial board for the Wall Street Journal. He also offered the family a seat on board of New York-based News Corp., the media company he runs.

``You're going to start to see cracks in the Bancroft family,'' said Richard Dorfman, managing director of Richard Alan Inc., a New York-based investment company focusing on media companies. ``The pressure will build. My guess is: He will get the company.''

Murdoch, whose company publishes tabloids including the New York Post and the Sun in London, sought to reassure the Bancrofts he won't harm the reputation of the Journal, the largest U.S. business newspaper. Bancroft family members representing 52 percent of the voting power at New York-based Dow Jones rejected his offer of $60 a share on May 1.

Bancroft family members met yesterday to consider the offer, CNBC reported. Michael Elefante, a lawyer for the Bancrofts, didn't return calls or e-mails seeking comment. Howard Hoffman, a Dow Jones spokesman, also didn't return calls.

``Some of the members may be willing to listen,'' said Hal Vogel, a New York-based media analyst and author of ``Entertainment Industry Economics.'' ``His chances are better than 50-50 in winning. Patience is the right strategy.''

Patience

Shares of Dow Jones, also owner of Dow Jones Newswires and Barron's, gained 67 cents, or 1.3 percent, to $53.77 yesterday in New York Stock Exchange composite trading. Class A shares of New York-based News Corp., the third-largest U.S. media company, rose 25 cents to $21.74.

The Bancroft family controls about 64 percent of Dow Jones's voting power through Class A and Class B shares while owning about 25 percent of the stock. News Corp.'s bid values their stake at about $1.23 billion.

Christopher Bancroft, his cousin Elizabeth Steele and their cousin Leslie Hill, a retired airline pilot, are on the board of Dow Jones. Elefante is also a director. The Bancrofts trace their control to Clarence Barron, who bought Dow Jones in 1902.

The Ottaway family, which owns 6.2 percent of Dow Jones, also opposed the bid, saying the Dow Jones name would be ``damaged'' by News Corp., according to a May 6 statement.

A sale to Murdoch ``would lead to loss of the unique news quality and integrity of The Wall Street Journal and other Dow Jones publications and Internet services, and loss of the independence and integrity of a leading national editorial voice,'' Jim Ottaway Jr. said in the statement.

No Interference

In his letter, Murdoch, 76, said, ``Any interference -- or even hint of interference -- would break the trust that exists between the paper and its readers, something I am unwilling to countenance.''

Murdoch said he would establish an independent, autonomous editorial board at the Journal, as he did at The Times of London. A majority of the board would be required to hire or fire the editor and managing editor. The board would also mediate disputes between management and editors, he said.

Murdoch also said he would commit to ``ongoing involvement of the family'' in combined company, invest in the Journal and expand Dow Jones overseas.

The comments came after he praised the Bancrofts on a May 9 conference call, saying he also admired Dow Jones's management.

``He's trying to convince them to meet him in person so they can see he doesn't have horns, that he's OK,'' Dorfman said. ``He's trying to assuage any concern they have that their crown jewel will fall into the wrong hands.''

High Price

Murdoch's bid, which he made in an April 26 letter that was disclosed May 1, values Dow Jones at about 17 times projected 2007 earnings before interest, taxes, depreciation and amortization, according to Prudential Equity Group Analyst Steve Barlow in New York.

By comparison, McClatchy Co. paid 9.5 times projected profit for Knight Ridder Inc. last year and real estate billionaire Sam Zell is offering 10 times projected earnings for Tribune Co., publisher of the Los Angeles Times.

Two factors may help Murdoch, Vogel said.

Advertising revenue at the Wall Street Journal slumped 12 percent in April, hurt by lower ad spending by technology and financial companies. No other bidder has emerged since Murdoch's bid was made public on May 1.

``He's moving along pretty well on what he wants to do,'' Vogel said. ``He's playing it right.''

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

Last Updated: May 15, 2007 08:55 EDT

		Email this article Printer friendly format