Potholes In The Road To Inevitability

Looks like the allegedly invincible Murdoch juggernaut may have hit a pothole on its way to imposing its puissant will upon the allegedly outgunned Bancrofts:

Rupert Murdoch’s News Corp. may be preparing to walk away from a $5 billion bid for Dow Jones & Co. after trying without success to win support from the controlling Bancroft family, Pali Research analysts said. News Corp. “is increasingly frustrated” with the failure of family members to respond to overtures by Murdoch, Pali’s Richard Greenfield and Mark Smaldon wrote today in a note to investors. Directors of New York-based Dow Jones took no action on the bid after Bancroft family members said a majority of their shareholder votes would reject the offer of $60 a share.

News Corp., Greenfield and Smaldon predicted, will rescind its offer for the publisher of the Wall Street Journal in “the next couple of weeks and leave Dow Jones to fend for itself.” Dow Jones is not a “must-have” for News Corp., and the New York-based company isn’t expected to raise its bid to $80 a share as a way to pressure the family to accept it, they said.

“It is `silly’ for News Corp. to simply stand around endlessly waiting for the Bancroft family to change their minds,” New York-based Greenfield and Smaldon wrote. Greenfield, co-head of London- and New York-based Pali Capital Inc.’s Pali Research, rates News Corp. shares “buy.”

A News Corp. spokesman, Andrew Butcher, had no comment on the Pali Research report. Dow Jones spokesman Howard Hoffman also declined to comment.

Shares of Dow Jones, also owner of Dow Jones Newswires and Barron’s, fell $1.85, or 3.5 percent, to $51.10 at 4:01 p.m. in New York Stock Exchange composite trading. News Corp.’s Class A shares gained 28 cents, or 1.3 percent, to $22.33.

Of course, it could be that Murdoch is still planning to stick it out even if it means increasing the price he’ll pay; he’s been willing to do protracted deals before. But NewsCorp’s supposed to be rolling in cash right now, with a value alleged to be nearly twenty times that of Dow Jones, enough for NewsCorp to have just gone ahead and made the Dow Jones shareholders an irresistible $80 a share offer. And Rupert Murdoch is seventy-six years old; he’s been described as impatient to do one last quick big deal before he dies. He might decide to find an easier target – or his advanced years may make him more determined to get what he sees as the crown jewel of the US media. (And it’s also a way for him to get free publicity for the launch of his planned cable business news channel.)

Another factor is the fact that the Democrats now nominally control Congress, though not by veto-proof margins, and have indicated that any attempt by him to nab Dow Jones would face congressional scrutiny. Murdoch may have reasons to wish to avoid such scrutiny.

Or it could be that Murdoch — who is already subsidizing the New York Post to the tune of $70 million a year and the other perennial money-loser, the Weekly Standard, which bleeds $3 million of red ink every year — has decided that even a $60-a-share bid is too much to pay, as it works out to being sixteen times Dow Jones’ estimated 2007 earnings; most media companies generally sell for between ten to twelve times their most recent yearly earnings.

Obscured by the noise of the Dow Jones hostile takeover attempt, Murdoch’s media empire has hit some other snags lately, too. His New York Post has lost a seven-year battle to take out the New York Daily News; they can keep their circulation steady, but only if they charge half of what the Daily News does — New Yorkers obviously don’t see the Post as being worth more than that. Even worse, a scandal involving allegations made by former Post employee Jared Paul Stern that Murdoch deep-sixes negative news about China, in addition to pushing his other well-known biases (cough*GOP*cough) and allowing his people to shake down restaurants for cash, may have been another factor in the sudden problems Murdoch is facing with acquiring Dow Jones.