Signs of trouble for Murdoch's bid

Just a few weeks ago, it seemed inevitable to many on Wall Street and in the media industry that Rupert Murdoch would prevail in his campaign to add Dow Jones & Co., publisher of The Wall Street Journal, to the media empire he has spent a lifetime building.

But with the sudden departure of a director in protest of the deal with News Corp. and more signs of dissent in the family that controls Dow Jones, that outcome seems less assured now as the monthslong process comes to a head.

The endgame for Dow Jones begins on Monday, when the controlling shareholders of the company, the Bancroft family, will receive a briefing on the outline of a $5 billion deal that Dow Jones' board signed off on Tuesday evening.

They are expected to decide the fate of the company within a few days after that.

The family has been concerned about accounts of corporate interference at other Murdoch-owned newspapers, and demanded assurances that the newsroom of the Journal, which has been under the family's control since 1902, would be free of corporate meddling. Murdoch says those concerns are unfounded.

Anti-Murdoch sentiment among Bancroft family members is sure to be fanned by the abrupt departure late Thursday of Dieter von Holtzbrinck as a director of Dow Jones.

In a tersely worded resignation letter, von Holtzbrinck, whose family controls a prominent publishing company in Germany, including the leading business daily there, said that while Murdoch's offer is "very generous in financial terms," von Holtzbrinck is "very worried" that Dow Jones' journalism will suffer under Murdoch.

The Bancrofts could either kill the deal themselves by promising to vote against it or show such tepid support that News Corp. could walk away rather than risk a nasty shareholder fight later.

The first consequence of a failed deal would surely be a sharp decline in the shares of Dow Jones, most likely to around the mid-$30s level they had been trading at prior to Murdoch's $60-per-share offer becoming public in early May.

A collapse in Dow Jones' stock in turn would leave a lot of shareholders unhappy, which could lead to the possibility of shareholder lawsuits.

However, given that investors already knew full well that the company has controlling shareholders, it's not clear that there's much they can do to legally challenge a decision not to sell the company.

source : google news