Rupert Murdoch's $5 billion offer for Wall Street Journal parent Dow Jones (DJ) sent the pundit class into overdrive May 1, with bloggers speculating about any number of suitors, from General Electric (GE) to private equity firms. Also on the Web: irate howls from the Dow Jones workers' union about Murdoch's journalistic reputation and speculation about how a News Corp./MySpace/Dow Jones triad would fare in the media landscape for business news.
At the widely read BuzzMachine.com, journalism professor Jeff Jarvis notes the industry's long-term structural problems, but offers a few ideas on what Murdoch may do with Dow Jones if he gets it. "I still think these properties are a difficult long-term play. There are lots and lots of short-term efficiencies to be found. But what then? If you don't have an aggressive strategy and investment in turning these businesses completely inside-out, then what's your aftermarket?" Jarvis asks. "So what can Murdoch do with Dow Jones? He can start one helluva financial news channel now. He can build out an online powerhouse from a solid base. He can make it yet more international."
Jim Cramer, Wall Street's loudest observer and a regular on CNBC, the cable channel run by a GE-Dow Jones partnership that broke the news, suggests at TheStreet.com that the time could be right for the controlling Bancroft family to reconsider its long-held opposition to a sale of Dow Jones. Why? "…The incredible underperformance and the possibility of it being permanent, maybe this time it will happen."
Change Afoot at the Top
Back in 1996, former hedge fund trader Cramer held a 4% stake in Dow Jones and met with Murdoch about the press baron's keen interest in acquiring the paper. The Bancrofts were opposed, and no deal ever happened. But after 11 years of anemic share performance, the family—or at least enough of its members—may be ready to cash out. What's more, change is afoot at the top: Dow Jones has a relatively new chief executive officer and just announced a new managing editor for the Journal.
The union representing Dow Jones workers, the Independent Association of Publishers Employees (IAPE), quickly slammed the offer and said workers "from top to bottom" oppose a sale to Murdoch. They're also leery of the premium, saying it "suggests only one recourse to make the acquisition profitable: gutting the enterprise and slashing the staff that make it the leading financial news organization."
The controlling family may have another scenario to consider, now that Dow Jones is officially in play: a white-knight buyer. If the Bancrofts (or enough of their more persuasive advisers) decide a deal does makes sense, but not with Murdoch, who could step in with sufficient funds and the "proper" journalistic reputation? The New York Times or The Washington Post, says Mark Potts at Recovering Journalist. "Can Rupert Murdoch's money overcome any misgivings the Bancroft family has [sic] about Murdoch ownership of one of journalism's great franchises? Would they rather hook up with the Sulzbergers or the Grahams? Or will they try to stay independent? Stay tuned. Given the personalities and brand names involved, this is going to make the Knight-Ridder (MNI) and Tribune Co. (TRB) conflagrations look minor."
Another, non-news buyer also emerged in some of the pontification about Dow Jones: GE. The conglomerate already has a big stake in the field through its CNBC partnership, and could probably roll a newspaper and full ownership of CNBC into its mix easily enough. Barry Ritholz at The Big Picture writes: "I would think that some senior people at CNBC are pleading with GE execs to make a run at Dow Jones—if for no other reason than to keep the WSJ out of Rupert Murdoch's hands," Ritholz writes. "Once GE owns Dow Jones, they could then spin out their entire media group as NBC Universal—including NBC, CNBC, WSJ, Barron's, MarketWatch, etc. at a much higher valuation. If CBS (CBS) has a $22B market cap, well then the entire NBC/WSJ/DJ/CNBC package should be in the $10-20B range, depending upon the total revenue range of all the media properties included."
Newspaper editor-turned-Silicon Valley venture capitalist Alan Mutter predicts a difficult road for anyone who may try to outbid Murdoch, who, Mutter notes, would realize far more value from his new cable channel with the Journal's imprimatur than one dubbed simply Fox Business Channel. "Because the strategic value of the contemplated transaction to News Corp. (NWS) far outweighs its intrinsic economic value, it is difficult to imagine how any alternative acquirer could outfox Mr. Murdoch," Mutter writes.
The other factor in Murdoch's favor is simple: cash. As Mutter says, News Corp. has way more of it—$5.7 billion—on its balance sheet than either the Times or the Washington Post. So both newspapers would be forced to borrow to fund any serious bid, piling heavy debt into their operations at a time when newspapers face dim business prospects.
One of Dow Jones' own properties, MarketWatch, tosses out the prospect of an eventual legal fight if the family decides to spurn such rich premiums. The MarketWatch story quotes a Benchmark Co. analyst, Edward Atorino, as saying Dow Jones could be sued if it doesn't want to take the money that's likely to come its way.