Murdoch May Use `Charm Offensive' on Bancroft Family (Update3)

By Cecile Daurat

June 4 (Bloomberg) -- Rupert Murdoch will try to persuade skeptics among Bancroft family members that he's sincere in his pledge to maintain editorial independence at Dow Jones & Co. when he meets with them today regarding his takeover proposal.

``He'll try to show them he is a newspaper man at heart and convince them that he'll do what's right,'' said Richard Dorfman, managing director of Richard Alan Inc., an investment firm focusing on media companies based in New York. ``He's put on the charm offensive.''

The Bancrofts, who own 64 percent of Dow Jones voting stock, agreed last week to meet with Murdoch, chairman of New York-based News Corp., to discuss his $60-a-share offer. The decision ended a month of resistance to the bid and opens the door for Murdoch to negotiate for the publisher of the Wall Street Journal and the family's 105-year-ownership. The meeting is taking place today at the offices of the Bancrofts' legal adviser, New York-based Wachtell, Lipton, Rosen & Katz, the Wall Street Journal reported.

Murdoch convinced Thomson Corp. in 1981 to sell him the Times of London, and won the backing of management with promises of editorial independence. Murdoch has made similar promises to the Bancrofts, who he is wooing with letters, flattery and assurances he won't tamper with the Wall Street Journal's independence.

Shares of New York-based Dow Jones, also owner of Dow Jones Newswires and Barron's, declined $1.08 to $60.12 at 10:17 a.m. in New York Stock Exchange composite trading. They jumped 15 percent June 1, a sign investors bet Murdoch will succeed in his efforts. Class A shares of News Corp., owner of the New York Post and the Fox television network, were unchanged at $22.58.

`Newspaper Man'

On a conference call to discuss News Corp.'s earnings, eight days after the offer was made public May 1, Murdoch praised the Bancrofts and the Wall Street Journal's management.

``We admire the Bancroft family and the Dow Jones management,'' Murdoch said.

Two days later, Murdoch sent the family a letter offering to create an autonomous editorial board for the Wall Street Journal, the second-largest U.S. newspaper by circulation, and give the Bancrofts a seat on News Corp.'s board. In the letter, Murdoch described himself as a ``newspaper man'' and wrote about his pride in his children and the legacy left by his father, a former reporter. He will bring his son James Murdoch, chief executive officer of News Corp. affiliate British Sky Broadcasting, to the meeting, the Wall Street Journal reported.

``This is tactically as clever a play as you'll see,'' said Leo Hindery, a former cable-TV now executive managing partner at InterMedia Partners LP, a New York-based private equity firm. ``As a tactician, strategist, long-term investor, he's literally without peer.''

Editorial-Oversight Board

Murdoch's bid won't include ceding control of an editorial- oversight board to the Bancroft family, the Wall Street Journal reported yesterday, citing an interview with Murdoch. He told the Journal the oversight board should comprise people without business ties to him or the Bancroft family. Murdoch's News Corp. would be open to a structure similar to one at Reuters Plc, where trustees have veto power for any deal, the report said.

The family, with about three dozens adults, descends from Jane Bancroft, whose stepfather, Clarence Barron, acquired Dow Jones in 1902.

Michael Elefante, a lawyer for the Bancrofts, didn't return calls seeking comment. Andrew Butcher, a spokesman for News Corp. declined to comment.

Groundwork

The bid may need to be raised by a nominal amount to win the family's support, Hindery said.

Murdoch laid the groundwork for the family's change of heart with an offer that was 65 percent higher than the stock's price when the bid was made public.

The following week, Toronto-based Thomson said it planned to acquire Reuters Group Plc for 8.7 billion pounds ($17.3 billion), potentially increasing competition for Dow Jones. Bloomberg LP, parent of Bloomberg News, competes in providing financial news and information.

The family's options may be limited because no other bidders for Dow Jones have emerged, said Norman Pearlstine, former Wall Street Journal managing editor and now a managing director at Washington-based buyout firm Carlyle Group.

`Daunting Price'

``It's a daunting price that Murdoch has put out there,'' Pearlstine said. ``Whoever would be coming in over that would either have to see synergies that are very hard to imagine or that it would have to be an ego-kind of buy.''

Murdoch's offer places a higher value on Dow Jones than that of Google Inc. and is almost double the valuation McClatchy Co., publisher of the Miami Herald, put on Knight Ridder Inc. last year and that real estate billionaire Sam Zell offered for Tribune Co.

To win assets he coveted, Murdoch, 76, has treated past sellers in a similar way, impressing them with his knowledge of the business and reassuring them with guarantees. That helped him transform a small Australian newspaper business into an empire with 175 newspapers, a movie studio and television network.

``He is a very well-mannered man and has quite a bit of charm,'' said James Hoge Jr., who put together a group of investors to buy the Chicago Sun-Times in 1984 and was outbid by Murdoch. ``He is a good listener.''

`Does His Homework'

After News Corp. bought the newspaper, Murdoch talked Hoge, then editor-in-chief, into staying to help with the transition over a bottle of champagne. ``He always fills the conversation with very pointed questions based on a lot of knowledge of the subject, he does his homework,'' Hoge said.

Soon after the sale, employees began fleeing to competitors, said Hoge, who left for the Daily News in New York. The Sun-Times was later sold to Conrad Black.

In 1981, Murdoch offered the Times of London similar guarantees to those he is making to the Bancrofts, such as editorial independence. He also used his family in his appeals.

``I come from a newspaper family,'' Murdoch said during a meeting with Times executives during the negotiations, according to Harold Evans's book ``Good Times, Bad Times.'' ``I was brought up by my father, who was a journalist and editor before becoming a publisher.''

Murdoch named Evans editor of the Times in 1981. The two men had a falling out and Evans left in 1982.

``In my year as editor of the Times, Murdoch broke all these guarantees,'' Evans wrote. He declined to be interviewed for this article.

During the talks preceding the Times of London's purchase, Murdoch had used his charm to persuade long-time critics such as the Sunday Times editor-in-chief Denis Hamilton to support him.

Murdoch's ``alarming charm'' even worked on Evans's wife Tina Brown. According to Evans, she wrote in her diary after a dinner with Murdoch in 1981: ``I had to admit I like him.''

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

Last Updated: June 4, 2007 10:22 EDT

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