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Murdoch makes US$5bn bid for Dow

Rupert Murdoch hasn't shrunk away from fights as he built News Corp into a global media empire. But his surprise US$5 billion bid for Dow Jones & Co, publisher of the Wall Street Journal, faces tough sledding after the company's controlling shareholders said they would block it.

Murdoch has long admired the Journal and his ownership of it would mark a capstone in the career of the 76-year-old Australian-born executive, who is arguably the most powerful media mogul on the planet.

His proposal to buy Dow Jones would also dovetail with News Corp's plans to launch a business-oriented cable news channel to rival CNBC, but the offer ran into trouble on Tuesday when the Bancroft family, which controls the shareholder vote of Dow Jones, said it would oppose the deal.

However, Dow Jones said late on Tuesday that the Bancroft family, the company's controlling shareholders, said they would vote shares representing just over 50 percent of the company's voting power against the deal.

The story is far from over. Unlike the Grahams at the Washington Post Co or the Sulzbergers at the New York Times Co, families which control their respective publishing companies, the Bancrofts are not involved in the day-to-day operations of the Journal or Dow Jones.

It is also possible that other bidders could emerge for the company, which has long been coveted by other media owners for the powerful voice the Journal has in the business world. The Bancrofts have been unwilling to sell in the past, but their moves to reduce their economic ownership in Dow Jones also signal their desire to have investments elsewhere.

Peter Kreisky, president of Kreisky Media Consultancy, said Dow Jones has "blaringly underleveraged assets" that could be turned around by someone like Murdoch and that Dow Jones' management has been "very risk-averse to leveraging their brand."

The offer values Dow Jones at US$60 per share, a massive premium of 65 percent over Dow Jones' closing share price before the deal was announced. The shares shot up US$19.87, or 54.7 percent, to close on Tuesday at US$56.20 in very heavy volume on the New York Stock Exchange after reaching as high as US$58.47.

Murdoch's bid came at a time of unprecedented deal activity among newspapers, which are struggling to reinvent themselves as readers and advertising dollars increasing move to the Internet.

In an interview on News Corp's Fox News Channel, Murdoch said the Journal would benefit greatly from being part of a larger media company and had great potential for increasing both its print circulation as well as its online presence worldwide.

The prospects of ownership by Murdoch faces significant opposition within Dow Jones. The union representing its employees, the Independent Association of Publishers' Employees, issued a statement on Tuesday saying that Murdoch "has shown a willingness to crush quality and independence, and there is no reason to think he would handle Dow Jones or the Journal any differently."

Dow Jones raised the ire of shareholder advocates two years ago by making changes to its rules that would allow the Bancroft family to maintain voting control even if they liquidate part of their holdings. Dow Jones' most recent proxy statement said that the family owns 24.7 of the economic interest in the company and controls 64.2 percent of the shareholder vote.

News Corp's main businesses are now in TV and entertainment -- including the Fox broadcast network and the 20th Century Fox movie studio -- but Murdoch got his start in newspapers and still owns many of them in England and Australia, in addition to the New York Post.

Murdoch has long been know to have an interest in owning Dow Jones, although he said in a public interview in February that he had been "cooling" on the idea and doubted that the Bancroft family would sell. However, he also said then that the Journal had a "wonderful brand" and could be doing more to go up against the New York Times.

In addition to the Wall Street Journal, Dow Jones also publishes Dow Jones Newswires, Barron's, several leading market indicators including the Dow Jones industrial average and a group of community newspapers.

News Corp also owns the popular social networking site MySpace and satellite broadcasters in Europe and Asia.
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