Wall Street Journal Saga....

I wanted to take a little break from the bschool discussion to talk about another business topic that has caught my interest recently. Namely, the Wall Street Journal soap opera that is playing out. The main story line is that in early May, it became publicly known that Rupert Murdoch's News Corp. was offering $60 a share for the WSJ's parent, Dow Jones Co. This was a significant premium, greater than 60%, over the stock price up to that point. The initial response from the controlling shareholders, the Bancroft family, was rebuff. There was no interest in selling the company. However, since then, it appears that the discussion has heated up a bit, and the acquisition may happen yet. There are numerous subplots to liven things up a bit as well.

I think Rupert Murdoch is very shrewd in making a play for WSJ. Clearly he recognizes the brand value of the premier name in business reporting, especially when considered in the context of the Fox Business Channel that is going to launch sometime this year. The WSJ Brand would bring instant credibility to Fox's business channel. Fox's competition in the market for business news tv channel is CNBC. Having the WSJ as a crown jewel behind the Fox Business Channel has got to be making CNBC ad sales VPs nervous.

Murdoch's timing on the deal is impeccable. Newspaper stocks are in the doldrums, and Dow Jones and Co. in particular is at multiyear lows. Even if the deal does not work out, he's already made a bit of a splash for his Fox Business Channel. Most of the Dow Jones shareholders have to be loving this offer. The question is, will there be another offer in the works or do they take this one? And that is where some of the subplots come in.

Yesterday, there was an AP release that indicated that a Dow Jones union representing workers was reaching out to potential investors seeking alternatives to Murdoch's bid. The unions motivations of course, are driven by fears of Murdoch meddling with the current structure of the company and potentially restructuring (read layoffs). Some of the investors that were named were Ron Burkle and Warren Buffet of Berkshire Hathaway. I don't know Burkle, but I thought the Buffet angle was curious. Buffet already owns a couple of newspapers, the Buffalo News (outright ownership), and the Washington Post (I think about 20% ownership), through Berkshire. Berkshire also owns one of the major wire services used by newspapers, Business Wire. So clearly, Buffet likes the newspaper business. However, he has also recognized the deteriorating economics of the newspaper business as more and more readers move to the Internet for their news. I doubt Buffet will make a bid for the WSJ. He likes to buy stocks cheap, and a 60% premium on a stock he could have had a month ago is not cheap. It is also not Buffet's style to compete for a property. I think Buffet likes to buy stuff nobody else is buying, with long term prospects for stability and profitability. I don't think either of those things can be said about the WSJ. Lastly, the value that WSJ would bring to Berkshire's media portfolio does not come close to what it could do to Murdochs' portfolio. Clearly there is more in it for Murdoch than there is for Buffet on a comparative basis. Nonetheless, it does bring up the question about what other alternative bidders may step up. Anybody remember GE's Jack Welch looking to get into the newspaper business not to long ago. Wait a minute, wasn't Jack Welch the CEO of GE, which owns NBC, which owns CNBC? hmmmmmm.

There are a few other subplots as well that are interesting. Apparently the buyout bid has gotten mixed reactions from the Bancroft family, who are the controlling shareholders. On a plane ride I was reading a great article about the infighting between the "younger" faction who wants to take the money and run, and the "older" faction who wants to hold on to their dividends. The article appeared in...you guessed it...the Wall Street Journal.

To add to the family bickering, an influential ex-board member and the ex-chairman of Dow Jones, have publicly come out against the deal.

There was also an alleged crime associated with the buyout from News Corp. Apparently, there was a couple in Hong Kong, who may have been aware of the pending offer, and traded on the information. They made a lot of money, on the order of a few million dollars. They are being investigated.

I think this might be another nail in the coffin for the newspaper business who are being attacked from all sides (thank you Craig's list, Monster.com and others). It'll be interesting to see how this all plays out.

What I'm reading: Dow Jones Confirms Receipt of Unsolicited Acquisition Proposal

What I watched: Pirates of the Caribbean

P.S. I finally saw Pirates of the Caribbean this weekend. (Was that Keith Richards making a cameo?) While I found it entertaining to watch, don't ask me what it was about. There were too many plot twists for me to follow. Or maybe my brain was just mush from bootcamp. I would rate it a 7 out of 1o.