Dow Jones & Co's board backed a US$5 billion takeover bid by Rupert Murdoch's News Corp, leaving a final decision in the hands of the controlling Bancroft family.
Directors of Dow Jones, publisher of the Wall Street Journal and Barron's, are ready to recommend the US$60-a-share bid, the New York-based company said in a statement late on Tuesday following a board meeting. The price is 15 percent higher than Dow's closing share price on Tuesday and represents a 65 percent premium to the close on April 30, a day before the offer became public.
The Bancrofts, who control 64 percent of Dow Jones, are evaluating the proposed transaction, and there is no guarantee that there will be enough support, the company said. Family members are split over whether to sell the company they have controlled for more than 100 years to New York-based News Corp.
"For all the teeth-gnashing and hand-wringing over Murdoch as owner, ultimately, money talks," said Robert Broadwater, managing director of media investment bank Broadwater & Associates in Bronxville, New York.
He spoke before Dow Jones backed the takeover.
"This is a blow-away offer," he said.
Some Bancroft family members have worried that Murdoch, 76, would use the Wall Street Journal and Dow Jones's other news outlets to advance his business and political agendas.
News Corp publishes more than 110 newspapers internationally and owns the Fox television and news networks.
Dow Jones shares fell US$0.50 to US$56.45 on Tuesday in New York Stock Exchange composite trading, the lowest since May 31, as some investors speculated the Bancrofts may oppose the sale.
In a separate statement on Tuesday, News Corp said it is grateful to Dow Jones' board for its "strong vote of support."
The Wall Street Journal, the second most widely circulated US newspaper, would give News Corp instant clout in financial news.
"News Corporation is confident that, in combination with its global content and distribution platforms, Dow Jones will become an even more formidable and respected company," News Corp said.
Under a draft merger agreement reviewed by Dow Jones' board on Tuesday, Dow Jones stockholders may be able to choose to receive equity securities in a News Corp unit that would hold Dow Jones.
Those securities would be exchangeable for shares of News Corp Class A common stock, according to Dow's statement.
News Corp Class A shares rose US$0.52 to US$22.48 on Tuesday.
They have gained 4.7 percent this year.
Murdoch, who has long coveted the Wall Street Journal, plans to use the newspaper, Dow Jones Newswires and Barron's magazine to support his Fox Business Network, scheduled to debut on Oct. 15.
Material from Dow Jones could also be used to supply News Corp's media holdings in Europe, Asia and Australia as well as newspapers including the Times of London.
"Murdoch is going to acquire expanded content that he can leverage, not only through multiple forums but in multiple markets," said Keith Wirtz, chief investment officer of Fifth Third Asset Management in Cincinnati, which owns 178,000 News Corp shares and manages holdings in Dow Jones for clients.
"Dow Jones is another piece of a puzzle he's been putting together for some time," he said.
Murdoch took a step toward acquiring Dow Jones last month when News Corp agreed to the Bancroft family's demand for a guarantee protecting the journal's editorial independence.
The Bancrofts will receive the proposed editorial guarantee along with the sale agreement.
"The Bancroft family still wanted the independence aspect for editorial staff," said David Joyce, an analyst at Miller Tabak & Co in New York, who has a "buy" rating on News Corp shares.
"News Corp isn't going to completely acquiesce. That's what it's boiling down to -- getting the Bancroft family accepting the compromise on how there'll be shared oversight of the editorial board," he said.
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