Dow Jones director quits over bid
By Joshua Chaffin in New York
Copyright The Financial Times Limited 2007
Published: July 19 2007 17:18 | Last updated: July 19 2007 23:15
Dieter Von Holtzbrinck, a German publishing executive, has resigned from Dow Jones’ board, saying that he could not support the company’s sale to Rupert Murdoch’s News Corp.
“Although I’m convinced that [the] News Corp offer is very generous in financial terms, I’m very worried that [Dow Jones’] unique journalistic values will long-term strongly suffer after the proposed sale,” Mr Von Holtzbrinck wrote fellow directors two days after they gave their backing to $5bn News Corp offer.
Mr Von Holtzbrinck, who abstained from that vote, is chairman of the supervisory board of Verlagsgruppe Georg von Holtzbrinck, which publishes German business paper Handelsblatt. Dow Jones took a stake in the paper in 1999 as part of a broader alliance between the companies.
Dow Jones’ fate now lies with the Bancroft family, whose members control 64 per cent of its voting power.
The Bancrofts are scheduled to meet their legal and financial advisers on Monday in Boston to review Mr Murdoch’s offer, as well as strategic alternatives the company has considered in recent months.
Jim Ottaway, one of the company’s largest shareholders, made a last appeal to them in Friday’s Financial Times, urging the family not to relinquish a company it has controlled for more than a century to Mr Murdoch.
Mr Ottaway, whose family controls 7 per cent of Dow Jones’ voting power, says the company is healthy and does not need to be sold, and that Mr Murdoch’s age and questions about succession at News Corp could pose risks to the Journal’s editorial independence.
“Who will keep Murdoch’s promises, which he is famous for not keeping himself, in the future?” Mr Ottaway wrote, adding: “News Corp is not a good long-term home for Dow Jones.”
Meanwhile, Dow Jones reported a 27 per cent drop in second-quarter earnings due to a continued slump in print advertising at the Wall Street Journal newspaper and special compensation charges.
For the quarter, profit fell to $21m, or 25 cents a share, from $28.8m, or 34 cents a share, a year earlier. However, revenue rose 16 per cent to $529.7m, helped by the acquisition of Factiva, the financial information company.
Richard Zannino, Dow Jones’ chief executive, told investors on Thursday that the Bancrofts were “carefully considering” the offer, but declined to speculate on their stance.
In spite of voting in favour of the proposed deal at Tuesday’s board meeting, Mr Zannino pledged that Dow Jones would press ahead with a transformation plan, regardless of the News Corp talks.
With the recent acquisitions of Factiva and eFinancialnews, the company has been trying to reduce its reliance on print advertising.
For the most recent quarter, the domestic Journal recorded a 6.8 per cent drop in print advertising revenues, and executives acknowledged on Thursday that July sales would also be “soft”.
Overall, the company said print revenues had fallen to 57 per cent of Dow Jones’ total.
Do not sell Murdoch the family treasure
By Jim Ottaway
Copyright The Financial Times Limited 2007
Published: July 19 2007 18:57 | Last updated: July 19 2007 18:57
Ihope the Bancroft family, when they meet on Monday in Boston, will vote against the agreement to sell Dow Jones to News Corporation. It is not easy for the Bancrofts to vote against a chorus advising them to sell. It is not easy to vote against their own immediate enrichment, or to deny a dramatic increase in family assets from $36 to $60 a share to their children, grandchildren and favourite charities. But there are good reasons not to accept the offer.
There is no need to sell Dow Jones, which was not for sale before Rupert Murdoch made what he described himself as “an insanely high” offer. Dow Jones is leading newspaper-dominated publishing companies with its successful transition to internet age electronic news businesses. Dow Jones is not a sick company. Under Peter Kann, the recently retired chairman, it sped up its transition. Under Rich Zannino, his successor, it has continued to grow. In a memo to staff, Mr Zannino said: “We have a very bright future as an independent company should the News Corp bid not come to pass.”
Mr Zannino nevertheless voted as a Dow Jones director for the sale to News Corp “because our prospects might be even brighter in combination with the businesses of News Corp”. That is not a strong argument for ending more than 100 years of Dow Jones as a successful independent business news company by selling it to a huge conglomerate in another unhealthy concentration of ownership of important global media.
News Corp is not a good long-term home for Dow Jones, a company with a $3bn rational market value that would disappear into a company with assets of $72bn, 85 per cent of the revenues of which come from entertainment, not serious news companies. Most of News Corp’s newspaper earnings come from downmarket tabloids in the UK. In the US, Mr Murdoch’s New York Post and Fox News are public statements of his personal, political and business interests and biases, not run in the Bancroft family spirit of public trusts.
At 76, Mr Murdoch is an exceptionally vigorous and clever businessman, but he is not immortal and he is without a clear or reliable management succession plan. As in any family-dominated company, there are sure to be ar- guments and uncertainties over ownership and management control when he retires or dies. Who will keep Mr Murdoch’s promises, which he is famous for not keeping himself, in the future?
Fear of the future should not drive the Bancroft family to sell Dow Jones to Mr Murdoch. Their fear that Dow Jones’ stock price will drop if they turn down his bid is exaggerated by their advisers to scare them into selling. Of course it will drop, but rational market analysts estimate the stock price would go back to the $36-$40 range where it was before the bid.
Their fear of future competition as a smaller news media company among global giants was increased by the coming Thomson purchase of Reuters, both of which now distribute Dow Jones news services. But the potential loss of revenues to Dow Jones has been greatly exaggerated. Of course there is plenty of competition in business news, but there is a growing need for more sophisticated and absolutely reliable business and market news.
Their fear that Dow Jones cannot continue to expand its electronic businesses, such as wsj.com, Factiva and Marketwatch, because of lack of investment capital is also exaggerated. Dow Jones has greater debt capacity, if it is willing to use it, and can find strategic partners and investors to create new electronic businesses if needed.
The biggest problem the Bancroft family faces is fear itself. They also feel family fight fatigue, after the loss of $1bn in the 1990s’ Telerate disaster led to sharp criticism of Dow Jones management and unhappy arguments among and within the three big family groups, and between parents and children. Bancroft family divisions are inevitable in the fourth generation of Dow Jones ownership over 100 years. But all of them are good people, torn by their choices, with many Bancrofts of all ages who feel a noble loyalty to their family tradition of protecting the independence and high standards of Dow Jones and its people.
I hope a majority will vote to refuse Mr Murdoch’s generous offer, without fear, but with confidence in a strong Dow Jones that is making a remarkably successful transition to the electronic information age. Why give a very bright future as an independent company to Rupert Murdoch?
The writer, whose family controls 7 per cent of Dow Jones voting power, retired as a director in 2006 after 33 years in the management