Rupert Murdoch's bid to buy the Wall Street Journal's parent company, Dow Jones, for a reported $5 billion not only took the American publishing world by surprise – it sent shock waves through Wall Street.
Shares in many big newspaper companies soared. Although Murdoch has never made secret that he would like to own the WSJ, one of America's three top selling papers, his bid was nevertheless a surprise. Firstly it was unsolicited, and the reaction of the family that owns the paper is still not clear. All a spokesman would say is that the Bancroft Family, which has owned most of the shares in the paper since the Twenties, is "evaluating the proposal".
It is not certain whether the family is against the offer – or is trying to get Murdoch, or any other bidders, to sweeten the offer. The Murdoch offer is roughly two thirds the price the company was valued recently. There is a possibility that Murdoch's offer might encourage others, such a the Washington Post and the New York Times to make counter-bids.
The Murdoch bid comes at a critical moment in the American newspaper industry, a time when readers have been defecting, circulations have been declining and profits eroding. Murdoch's audacious attempt to get control of the WSJ, which next to the NY Times and the Washington Post, is regarded as one of America's most influential newspapers, is already creating controversy.
At the moment the only attention-getting paper that News Corp owns in the US is the NY Post, a tabloid, that has been losing money for years and is only kept alive by Murdoch's largess. It's been losing an estimated $20 million a year. But Murdoch still has a big stake in American tv, as well as the 20th Century Fox film studio.
Murdoch, it's well known, has hankered after The Wall Street Journal for years. Its conservative slant reflects his own political views. Later this year he is planning to launch a business tv channel in the US. Owning the WSJ would strengthen its clout and prospects.
The chances that Murdoch's bid might succeed? Unlike the Washington Post and the NY Times, both of which are family owned, no members of the WSJ's Bancroft family has management control. And the family – about 30 strong – is widely dispersed. Although other companies, such as the NYT and Washington Post, have expressed interest in the past in the WSJ, whether they would – or could – ever match the News Corps offer is less certain.
The only negative reaction to Murdoch's offer has come from the trade unions, particularly the Independent Association of Publishers' Employees, which issued a statement deploring the possible take-over – accusing Murdoch of a willingness to "crush the independence of his employees".
The take-over, the statement added, was opposed by the staff – from top to bottom. At the same time many observers pointed out that News Corp would be unlikely to undermine the Journal's long-established reputation for journalistic independence which has over the years won it many awards.
As one journalism expert, Richard Wald, a professor at the Columbia University School of Jouirnalism, sympathetically put it "He would never buy it to destroy it."
True or not,the Murdoch offer boosted newspaper shares on Wall Street substantially. Shares in the NY Times were up almost 7 per cent, Gannett's shares climbed almost as much and shares in the Washington Post were up almost 3 per cent. Not unexpectedly Dow Jones shares shot up over 50 per cent. One question still to be answered is whether News Corp can afford to buy the Wall Street and its ancillary companies, such as the business magazine Barron's, the Dow Jones News Wire and a number of small community newspapers.
Some experts say there is no question it can. News Corp, they point out has a "market value" of at least $70,000 million. It has at least $5,000 million in cash reserves, and could easily raise more through borrowings.
Could the Murdoch offer lead to a full-scale bidding war? Most Wall Street experts think that unlikely. Either the Wall Street Journal will go to Murdoch – or not at all.