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Murdoch unfazed by Dow Jones' rebuff

And now for the charm offensive.

That is the course Rupert Murdoch will pursue after the board of Dow Jones said late on Wednesday that it would not consider his US$5 billion bid for the company because the Bancroft family, its controlling shareholder, was opposed to the offer.

In a brief statement following a four-and-half-hour board meeting, the directors said they would "take no action" since the family had indicated that 52 percent of the voting shares were against a transaction.

Yet the Dow Jones board did not reject the offer outright, leaving enough wiggle room for Murdoch, long known as an undaunted dealmaker, to still to try to work his powers of persuasion on the Bancroft family.

"All the board had said is that we know how to count," said a person involved in the deliberations who spoke on condition of anonymity because he was not authorized to speak. "Nothing more."

The family, which bought the Wall Street Journal and the Dow Jones news service in 1902, appears deeply divided -- and therein in may lie the opportunity for Murdoch.

The family says 52 percent of the votes are opposed to the deal. But that leaves another 12 percent who have not agreed to reject the offer. And the family consists of some three dozen members who are scattered around the country and are of different generations, with varying interests and aims for their holdings.

Pressure may also come from hedge funds and arbitragers who have snapped much of the non-family shares of Dow Jones in anticipation of a deal. They are likely to be disappointed -- and possibly send the stock price sharply lower -- if there are no further signs that the Bancroft family may be considering an offer. In any case, it would take just a handful of Bancroft family members changing their position, to swing the vote in favor of a deal.

Murdoch realized how important focusing on the Bancroft family would be very early in the process.

Late last week, in a follow-up letter about his US$5 billion takeover bid for the company to Peter McPherson, the chairman of Dow Jones, he used it as an invitation to have his family -- a sometimes fractious clan that includes sons James and Lachlan and a daughter, Elizabeth -- sit down and personally meet with the Bancroft family, the controlling shareholders of Dow Jones.

Murdoch and his advisers spent Wednesday evening parsing the Dow Jones statement as they began to plot strategy to wage a campaign to identify and woo those swing voters among the Bancroft family, a process that is likely to take weeks if not months, people close to the group said. Murdoch may also be forced to raise his bid of US$60 a share.

Some analysts have suggested that News Corp. could afford to pay as much as US$70 a share.

"The Bancroft family now finds itself firmly placed between the rock of Murdoch's reputation and the hard place of his generous buyout offer," said Louis Ureneck, chairman of the journalism department at Boston College and former deputy managing editor at the Philadelphia Inquirer.

Dow Jones shareholders continue to demonstrate that they think a deal will be struck.

The company's shares closed at US$56 on Wednesday, just US$4 shy of Murdoch's bid.

In after-hours trading following the statement by the Dow Jones board, the company's shares fell only US$0.33, still almost US$20 more a share than where they traded just two days ago before news of the offer emerged.

Whether shareholders are expecting Murdoch to win Dow Jones or whether they are betting on a bidding war to erupt is unclear. Among the more bullish is Michael Price of MFP Investors, who told Bloomberg News that Dow Jones could eventually fetch US$100 a share.

During Wednesday's board meeting, the directors contemplated starting an auction for the company, but ultimately concluded that they could not appear at odds with the Bancroft family, people involved in the decision-making said.

Still, no rival bidder has contacted Dow Jones and several of the usual suspects have suggested they are not interested, including Bloomberg LP, the Washington Post Co and General Electric.
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