Bancrofts Open Door

Bancrofts Open Door
To a Sale of Dow Jones

Controlling Family Says
It Will Meet Murdoch;
Shares Soar After Hours

By SARAH ELLISON, DENNIS K. BERMAN and SUSAN PULLIAM

Dow Jones & Co.'s 125-year history as an independent media company could be nearing an end.

The Bancroft family, which controls 64% of the company's voting power, said in a statement late yesterday that it would meet with Rupert Murdoch's News Corp. to discuss its $5 billion bid for Dow Jones, publisher of The Wall Street Journal. The family also said it would consider other bidders and options for the company.

In a statement after a meeting of Dow Jones's board, Michael B. Elefante, a Dow Jones director and representative of the Bancroft family, told directors: "After a detailed review of the business of Dow Jones and the evolving competitive environment in which it operates, the family has reached consensus that the mission of Dow Jones may be better accomplished in combination or collaboration with another organization, which may include News Corp."

The move, coming a month after Mr. Murdoch's offer was publicly disclosed, opens the door to him as well as other possible suitors. Though the Bancrofts maintained the option not to sell, their new willingness to entertain a deal makes one far more likely.

Indeed, investors pushed Dow Jones stock up 12% in after-hours trading, suggesting they believe a deal is imminent, possibly at a price higher than the $60-a-share offer from News Corp. Dow Jones stock, which had risen 46 cents to $53.31 in 4 p.m. trading on the New York Stock Exchange, later surged $6.48 a share to $59.79.

The Bancroft family will meet News Corp. and Mr. Murdoch, its chairman and CEO, "to determine whether, in the context of the current or any modified News Corp. proposal, it will be possible to ensure the level of commitment to editorial independence, integrity and journalistic freedom that is the hallmark of Dow Jones," according to Mr. Elefante. He said the family also was receptive "to other options that might achieve the same overarching objectives."

A representative of the company's board will be present at those discussions. That paves the way for Dow Jones directors to play a more active role in shaping the future of the company -- and to determine which bidder, if any, the company would sell to. Yesterday, Dow Jones said its board, which previously has not taken a position on News Corp.'s bid, "has determined to consider strategic alternatives available to the company, including the News Corp. proposal."

A News Corp. spokesman said, "We're grateful to the Bancroft family for agreeing to our suggestion of a meeting and we look forward to it."

With a majority of voting shares opposing a deal, the Bancrofts had been at a standoff with Mr. Murdoch since his offer became public a month ago. Family members also had rejected Mr. Murdoch's offer to discuss the bid, which represented a 67% premium to Dow Jones's stock price before the offer became public.

But over the past several weeks, the roughly three dozen adult members of the Bancroft family have been in frequent contact to discuss possible alternatives. Some family members have become convinced that "the status quo" is no longer an option for Dow Jones, according to people familiar with their thinking.

MORE

• Text of Bancroft statement

• Deal Journal: What Next for News Corp. Bid?

• Complete Coverage: A Deal for Dow Jones

The question of whether Dow Jones -- whose market capitalization has jumped to more than $4.5 billion since Mr. Murdoch's bid -- has enough scale to compete globally is fueled by recent upheaval in the news and financial-information industries, including the migration of news online and a broad decline in advertising and circulation in the newspaper industry. Besides the Journal, Dow Jones's properties include Dow Jones Newswires, online news site MarketWatch, Barron's and Factiva, an aggregator of news and information.

A particular concern is the planned $17.2 billion merger of Reuters Group PLC and Thomson Corp., which surfaced just days after Mr. Murdoch's offer for Dow Jones became public. That deal is expected to add competitive pressure on Dow Jones Newswires. Dow Jones executives have pressed the difficulties of remaining independent in discussions with members of the Bancroft family, according to people familiar with the matter.

By publicly declaring their willingness to do a deal, the family hopes to convey to potentially interested parties that they are willing to consider offers besides Mr. Murdoch's. No other bidders have surfaced publicly since the News Corp. bid was revealed. Some investment bankers say potential bidders were getting signals that the Bancrofts wouldn't sell the company to any party, or that they wouldn't entertain bids less than the hefty $60-a-share that Mr. Murdoch has offered.

The family said in its statement that it wanted to protect the editorial independence of the Journal and the strength of Dow Jones's other divisions. The family also said it isn't committing to a negotiation with Mr. Murdoch.

Still, some members of the family were confused about the implications of the statement, not quite realizing that they were effectively saying they were willing to explore a sale, according to people close to the board. As they were discussing the meaning of the statement at the board meeting, there was some debate about having it rephrased or even withdrawn, but just then, The Wall Street Journal posted a draft of the statement online. That ended the discussion, these people said.

Mr. Murdoch has repeatedly tried to assuage concerns -- including some expressed by members of the family -- that he would curb the Journal's editorial independence. In a May 11 letter to the Bancroft family, Mr. Murdoch said, that he was "first and foremost a newspaper man" and doesn't "apologize for the fact that I have always had strong opinions and strong ideas about newspapers; but I have also always respected the independence and integrity of the news organizations with which I am associated."

Mr. Murdoch also said he would provide added resources for Dow Jones, and was committed to beefing up the Journal's European and Asian operations and its Washington bureau. He indicated that he hoped the Dow Jones brand would help him promote a new Fox News Business Channel. He offered to establish "an independent, autonomous editorial board" and appoint a member of the Bancroft family to the News Corp. board.

News Corp. President Peter Chernin talks to Kara Swisher about the company's bid to buy Dow Jones.

Mr. Murdoch has shown a willingness to hold onto money-losing operations if they give him prestige or help him leverage his other businesses. At the same time, he has defended himself against critics who have said his media operations have pulled punches in China to help him gain government support for his businesses there.

In an interview Wednesday at the "D: All Things Digital conference" in Carlsbad, Calif., News Corp. President Peter Chernin said the "notion that we would somehow want to buy [the Journal] to change it is counterintuitive." He added: "We want to pay a premium because we believe it [the Journal] is the premier source of news and information in this specific aspect of this society and we believe the value of that is immeasurable." The conference is sponsored by The Wall Street Journal.

In his statement yesterday, Mr. Elefante said: "There can be no assurance that the dialogue with News Corporation or any other party will result in the negotiation, or the desire of family members to pursue the negotiation, and execution of any agreement," the statement said. The Bancrofts also stressed that the family members control the strings.

Still, the company's board now is likely to play a greater role. Generally, a board is obligated to at least listen to an incoming offer. But with the Bancrofts in control, the position of Dow Jones's board until yesterday had been that it would take no action on the offer given the family's opposition. After News Corp.'s bid became public, Dow Jones issued a statement saying it had been informed that votes representing 52% of the voting power of the company had rejected the bid.

News Corp. has said its offer would be cash or cash and stock. If the Dow Jones board decides to sell the company for cash instead of pursuing a strategic combination, it may enter what is called "Revlon mode" -- after a famous court decision -- which would essentially require the company, if the Bancrofts decide to sell, to take the highest bid on the table.

But if an offer for Dow Jones is partly stock, a company has more leeway. Delaware courts regard such deals as "strategic combinations" that may bring other matters into consideration. That gives the board latitude to extract concessions, for instance on the company's ongoing editorial independence.

Some specialists say the Dow Jones board is not required legally to recommend the highest offer, if its controlling shareholders oppose the idea.

"The law can't force the board to do something that is beyond their power," said Lawrence Hamermesh, a professor of business and law at Widener Law School in Wilmington, Del. As a result, he said, any study by the Dow Jones board of the company's options would have to take into consideration that the range of options is limited by the family's preferences.

But common shareholders likely will exert pressure on the company to push for the highest possible offer. "Is a great strategic alternative at $59.50 acceptable? Of course it is," said Brian C. Rogers, chairman and chief investment officer at T. Rowe Price, Dow Jones's largest outside shareholder, on Wednesday. "There are ways you can come up with a great plan B, and there are some lousy ways."

The premium offered by Mr. Murdoch has served to fend off other publicly listed suitors, which may have a hard time explaining the price to shareholders. General Electric Co. and Pearson PLC, publisher of the Financial Times, are considered possibilities; previously GE Chairman Jeffrey Immelt has said he wasn't interested, while Pearson has declined to comment. Privately held firms, such as Hearst Corp. and Advance Publications Inc., may be more willing to take the plunge, though neither has expressed interest. Both companies declined to comment.

Additionally, some family members have discussed selling a minority stake in the company to an investor, who might use that stake as part of a larger takeover in the future, said people familiar with the matter.

There also is the possibility that the family and an outside party could team up to make an offer for the entire company, with the family rolling over its stake and therefore reducing the final buyout price for a buyer with whom it felt more comfortable.

Dow Jones was founded by Charles Henry Dow, Edward Davis Jones and Charles Milford Bergstresser in 1882 and produced daily handwritten news bulletins called "flimsies" delivered by messenger to subscribers in the Wall Street area. The Bancroft family is descended from Jessie Waldron, the wife of Clarence Barron, who bought Dow Jones for $130,000 in 1902, largely with his wife's money. The couple passed their shares on to Jessie Waldron's two daughters; eventually the shares were transferred to a set of trusts.

Write to Sarah Ellison at sarah.ellison@wsj.com, Dennis K. Berman at dennis.berman@wsj.com and Susan Pulliam at susan.pulliam@wsj.com