Today's Wall Street Journal, and CNBC, reported on the final stages of the Bancroft family's sale of Dow Jones to Rupert Murdoch's News Corporation.
What is delicious irony, of course, is that, after all the Bancroft crowing and public fretting about 'editorial independence,' the deal's closing is now dependent upon them extracting a sort of modern "greenmail" from Murdoch.
To wit, some of the Bancrofts are demanding reimbursement for legal and advisory fees connected with the entire negotiation process. This, they argue, is in lieu of a simply higher price for their weightier, on a voting basis, and, thus, more valuable shares.
As my partner noted to me, in an email containing the initial inklings of this on Friday, it demonstrates that, in the end, the Bancrofts are shameless capitalistic whores, just as many decry Rupert Murdoch to be. It wasn't simply a matter of protecting the Journal's editorial sanctity that would lead to the deal's closing.
Oh no. That was just a first step. The real action comes now that the family is seeking to extract the maximum price they believe Murdoch will tolerate paying for their publicly-listed, but, ultimately, family-controlled company.
I posted on this topic at the time of Murdoch's bid, here, back in May. Then, the Bancroft family enlisted various greybeards, such as Peter Kahn, a former Journal executive, to publicly fend off Murdoch. In the ensuing months. they've looked high and low for other alternatives. However, as I wrote then, the truth is, print-only companies are simply too small, in an economically efficient sense, to survive in today's media world.
Murdoch is the best fit for the Dow Jones Corporation media assets. Others share his vision for how to use them, but only Murdoch actually has the goods. As for retaining a stake in the entity, as one interloper suggested, the family members who want to participate in future growth of the brand under Murdoch can simply by News Corp stock.
But the real story now is how the Bancrofts are making use of the two-class stock they created when Dow Jones went public, to extract maximum gains only for themselves. Personally, I have no pity for the non-family shareholders. Despite what some, like CNBC's guest host this morning, Ron Insana, may say about family shareholders not being entitled to their gains because they simply "inherited" the shares, other shareholders bought the stock knowing full well that they could not vote a controlling interest, even as a united class.
Thus, they knew that they always faced the prospect of the Bancrofts screwing them in order to cut a better deal for their controlling shares. And that is exactly what is happening now.
By demanding that the advisory fees they incurred during the sales process be paid by Murdoch, some Bancrofts are, in effect, receiving higher prices for their shares than other owners are. We used to call this "greenmail," back in the 1980s, when people like Carl Icahn accepted higher prices directly from management in order to repurchase his shares of a takeover target.
Now, however, the Bancrofts are using the tactic in reverse. In order to takeover Dow Jones, Murdoch must pay greenmail.
No doubt, if we were to search back through the sainted editorial pages of the WSJ back in the 1980s, we'd find sanctimonious pieces by the Journal staff decrying the practice of paying greenmail, or otherwise treating shareholders of the same company differentially.
All of which goes to show, in the end, it's all about capitalism, capital, and the money. No shame in that. Things generally go better when we are honest about our motives and keep financial activity in its realm, and charity or "public interest" elsewhere.
Obviously, in the end, the Bancrofts believe this, and are no different than the man who runs the company to which they are selling theirs.
Showing posts with label Dow Jones. Show all posts
Showing posts with label Dow Jones. Show all posts
Tuesday, July 31, 2007
Thursday, May 10, 2007
On Murdoch's Bid for Dow Jones
There was a very interesting piece in Monday morning's Wall Street Journal. It detailed the Ottaway's and retired Wall Street Journal executive Peter Kahn's opposition to Rupert Murdoch's offer of $60/share to buy Dow Jones.
On the surface, it appears to be a rather complex situation.
On one hand, Kahn, Ottoway et. al. sound antiquatedly quaint in defending journalistic integrity and independence. That's the sort of thing we used to hear from broadcast newsrooms, before cable television put them under.
In this case, blogging and cable TV have pressured print journalism. Why else the tie-up between CNBC and the WSJ?
Further, as a letter to the editor in today's Journal noted, the Bancrofts and The Wall Street Journal are all for capitalism, until it comes home to roost at their poorly-performing, partially publicly-held company. In that case, however, they argue for morals, standards, and eschew the same free market winds that they claim must blow throughout the economy.
For the record, the closing price of Dow Jones Inc. rose from $36.33 on April 30th, to $56.20 on May 1st. That's a 55% increase in the market price, nevermind Murdoch's promise of $60, which would be a 65% increase in the value of the stock. On an economic basis, it's clear that the time has come for someone else to create value with the Dow Jones stable of assets.
The nearby Yahoo-sourced chart of the Dow Jones stock price, versus the S&P500 Index for more than thirty years, tells a sorry tale indeed. The media firm has barely managed one-third the return of the market over this time, and has been flat for the last five years and declining over the last seven years.
On the other hand, there is the argument of journalistic independence. Critics say Murdoch will sell out the vaunted Journal staff that has won Pulitzer's for covering investigative stories in China. Kahn was reported to be concerned that, under Murdoch, the WSJ would not have earned those two Pulitzers for covering stories critical of China and its government.
Now, that sounds like something to consider. Kahn pointed to Murdoch's many actions calculated to placate the Chinese, so that his BSkyB service could beam into the country. He is reputed to have eliminated BBC from the satellite service, cancelled Chris Patten's last book deal, and sold the South China Morning Post, all to remove material offensive to the Chinese government.
Such accommodation worries Kahn.
At first, it worried me, as well. Do you force private equity to afford such ethics? Can Dow Jones afford this, on behalf of its shareholders, independently? Or is this something capitalism will simply cost out and, if necessary, eliminate as too expensive? Trusting someone else to do the investigative reporting and write the needed criticisms of China.
Then, while discussing this issue with my consultant friend, S, I stumbled upon the real answer. Murdoch's answer, actually.
The reality is that print is a dead, bygone medium. The CBS franchise program, 60 Minutes, breaks tons of stories. How? By using television, not print. Do you think for a moment that the same program, as a print medium, could ever have lasted? Not a chance.
What Murdoch understands is that by marrying the Dow Jones assets and brands, particularly The Wall Street Journal, to his existing multimedia empire, he will enable those brands to actually create more value while doing even more investigative journalism.
The Dow Jones board's recent Chair has been trying to goose the company's performance, to little avail. My guess is that most investors understand that the old media pond within which Dow Jones lives is going to overwhelm the effects of any one firm's individual efforts. It's time for a more modern media vehicle to properly invest in and use the Journal's brand franchise.
No, the narrow version of the journalistic independence argument won't work for a publicly held company. Maybe if Ottoway and the Bancrofts wanted to take the firm private. But that's not what they want. They want top dollar and journalistic immunity from any economic realities.
The likely best outcome for the Journal and the rest of Dow Jones' media assets is to join a modern, global multimedia entity which can leverage their values further than is possible currently, while affording investment in them to retain their current competitive attributes. More than anyone else in media, Murdoch fits this description.
The crocodile tears over a potential loss of editorial independence and a standalone media presence are misplaced. This is about a too-small, old media company which has failed to properly take advantage of its best brands to create shareholder value. It's time for the Bancrofts to put up or sell. Either commit to investing in Dow Jones to enable it to consistently earn superior returns and realize its brand values, or sell it to someone who can.
On the surface, it appears to be a rather complex situation.
On one hand, Kahn, Ottoway et. al. sound antiquatedly quaint in defending journalistic integrity and independence. That's the sort of thing we used to hear from broadcast newsrooms, before cable television put them under.
In this case, blogging and cable TV have pressured print journalism. Why else the tie-up between CNBC and the WSJ?
Further, as a letter to the editor in today's Journal noted, the Bancrofts and The Wall Street Journal are all for capitalism, until it comes home to roost at their poorly-performing, partially publicly-held company. In that case, however, they argue for morals, standards, and eschew the same free market winds that they claim must blow throughout the economy.
For the record, the closing price of Dow Jones Inc. rose from $36.33 on April 30th, to $56.20 on May 1st. That's a 55% increase in the market price, nevermind Murdoch's promise of $60, which would be a 65% increase in the value of the stock. On an economic basis, it's clear that the time has come for someone else to create value with the Dow Jones stable of assets.
The nearby Yahoo-sourced chart of the Dow Jones stock price, versus the S&P500 Index for more than thirty years, tells a sorry tale indeed. The media firm has barely managed one-third the return of the market over this time, and has been flat for the last five years and declining over the last seven years.On the other hand, there is the argument of journalistic independence. Critics say Murdoch will sell out the vaunted Journal staff that has won Pulitzer's for covering investigative stories in China. Kahn was reported to be concerned that, under Murdoch, the WSJ would not have earned those two Pulitzers for covering stories critical of China and its government.
Now, that sounds like something to consider. Kahn pointed to Murdoch's many actions calculated to placate the Chinese, so that his BSkyB service could beam into the country. He is reputed to have eliminated BBC from the satellite service, cancelled Chris Patten's last book deal, and sold the South China Morning Post, all to remove material offensive to the Chinese government.
Such accommodation worries Kahn.
At first, it worried me, as well. Do you force private equity to afford such ethics? Can Dow Jones afford this, on behalf of its shareholders, independently? Or is this something capitalism will simply cost out and, if necessary, eliminate as too expensive? Trusting someone else to do the investigative reporting and write the needed criticisms of China.
Then, while discussing this issue with my consultant friend, S, I stumbled upon the real answer. Murdoch's answer, actually.
The reality is that print is a dead, bygone medium. The CBS franchise program, 60 Minutes, breaks tons of stories. How? By using television, not print. Do you think for a moment that the same program, as a print medium, could ever have lasted? Not a chance.
What Murdoch understands is that by marrying the Dow Jones assets and brands, particularly The Wall Street Journal, to his existing multimedia empire, he will enable those brands to actually create more value while doing even more investigative journalism.
The Dow Jones board's recent Chair has been trying to goose the company's performance, to little avail. My guess is that most investors understand that the old media pond within which Dow Jones lives is going to overwhelm the effects of any one firm's individual efforts. It's time for a more modern media vehicle to properly invest in and use the Journal's brand franchise.
No, the narrow version of the journalistic independence argument won't work for a publicly held company. Maybe if Ottoway and the Bancrofts wanted to take the firm private. But that's not what they want. They want top dollar and journalistic immunity from any economic realities.
The likely best outcome for the Journal and the rest of Dow Jones' media assets is to join a modern, global multimedia entity which can leverage their values further than is possible currently, while affording investment in them to retain their current competitive attributes. More than anyone else in media, Murdoch fits this description.
The crocodile tears over a potential loss of editorial independence and a standalone media presence are misplaced. This is about a too-small, old media company which has failed to properly take advantage of its best brands to create shareholder value. It's time for the Bancrofts to put up or sell. Either commit to investing in Dow Jones to enable it to consistently earn superior returns and realize its brand values, or sell it to someone who can.
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