Rupert Murdoch’s News Corp. made a $5 billion offer for Dow Jones, representing an eye-popping 67% premium above the company’s recent market value. Shares of Dow Jones quickly shot up to near the value of the News Corp offer, indicating investor confidence that the deal will go through. Dow Jones publishes the Wall Street Journal and Barron’s. News Corp. also owns Fox, Fox News Channel, 20th Century Fox and MySpace.
Dow Jones, like The New York Times and Google, has different classes of stock that allow a small set of shareholders to block a deal. According to The Journal, the Bancroft family owns about 25% of the shares, but 64% of the voting shares:
A representative of the Bancroft family, which controls Dow Jones through a class of supervoting stock, informed the company’s board that there are enough shares to block News Corp.’s takeover offer.
That would be a bold move. Such a premium is unusual for a news company.
Is the bid good news for the newspaper industry? Investors seem to think so. They quickly bid up the stock of other newspaper companies.
I don’t think so. Dow Jones is a special case because the Journal has been in a much better position than the rest of the newspaper industry for two primary reasons:
- It never relied on classified revenue and thus didn’t suffer from the craigslist effect. Key classified categories like cars, real estate and jobs provided 1/3 of newspaper revenue. The Journal, being a national paper, didn’t rely on them as much as most newspapers.
- The paper has highly specialized content. At a time when many newspapers are simply repackagers of information, the Journal has unique content that is highly valued by its audience. Among major newspapers, the Journal is the only one that has made a successful business out of selling subscriptions to content online.
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