Would buying the Wall Street Journal be Rupert Murdoch's final masterpiece, or an act of insanity? Private equity investors will struggle to beat his $5bn bid. Warren Buffet, the feted investor, views intervention as "very, very unlikely".
And you can probably write off the Sulzberger family, which controls the New York Times and proposed a merger a decade ago. They're dealing with a nasty shareholder rebellion.
Donald Graham, chairman of the Washington Post Company, is almost certainly a non-starter. Four years ago, Graham said that anyone who bid $60 a share for Dow Jones would have to be "out of their mind". Last week, that's precisely what News Corp offered. So Murdoch has chosen his moment well, and his astronomically-high offer should deter many potential rivals.
This leaves just one big obstacle: the Bancroft family, which has controlled Dow Jones for more than a century. This clan of high-society Bostonians got its start when reporter Clarence Bancroft borrowed $2,500 from his wife's family to buy the paper from Mr Dow and Mr Jones in 1902.
Related
The Bancrofts exercise control through "supervoting shares" – the time-honoured technique of dynasties which want to retain control and attract outside investors. Although the family owns just one quarter of Dow Jones, it controls 64 per cent of the company's voting power – which is where Murdoch's bid gets interesting.
Business dynasties usually grow weaker over time. As the number of heirs increases, each gets a smaller slice of the financial action. And as decision-making power fragments, commitment grows weaker. No-one knows how many family members control the Bancroft votes. The New Yorker says there are "some 30" family representatives; the Murdoch-owned New York Post says 36. The New York Sun reckons there are 38.
The clan's sheer size is a recipe for discord. In public, Murdoch coyly insists that he's "not in the business of stirring up trouble in the family". Privately, he knows that leaves plenty of room for manoeuvre.
Content from our partners
He'll need it – partly because of the way in which his opponents within the family are organising their defence around an unusual clause in the company's articles of incorporation. It insists that shareholders, confronted with a bid, have the right to consider the "independence and integrity" of the company's publications – as well as the "social and economic effects" of a takeover.
This partly explains the growing agitation in the Journal's newsroom, where some 60 journalists have written letters to the Bancrofts, opposing the bid. Their aim is to force the family to consider whether Murdoch would be a fit and proper proprietor. Murdoch has responded with vast amounts of flattery.
"This is the greatest newspaper in America, one of the greatest in the world," he said during an interview on Fox News. "It has great journalists who deserve a much wider audience."
Kind words aside, the financials suggest that the Bancrofts may well be tired of the burden of ownership. Strapped for cash, the family has sold 85 per cent of its ordinary shares during the past decade.
"They don't have ‘fuck-you money' any more," a former Journal reporter said. "It matters to the younger generation." Clan ownership also looks increasingly incompatible with the big investments required to keep the Journal at the top of its game.
Dow Jones is creaking under the burden of hefty dividend payments. As Murdoch told the New York Times last week: "A year ago they made $81 million after tax, and paid $80 million in dividends. You can't grow a company that way."
And make no mistake: Murdoch's bid is alluring. On average, Dow Jones currently pays each Bancroft family representative an annual dividend of $570,000. News Corp's bid would trigger lump sum payments averaging $34m. It would take 60 years for the family to earn the same amount from their dividends.
But if greed is part of the equation, so is fear. Perhaps the biggest factor running in Murdoch's favour is the rise of the web. This is the kind of challenge that often defeats heirs and heiresses. The Journal is generally credited with making a decent fist of the transition to digital.
Commentators tend to be transfixed by the Journal's 930,000 paid online subscribers – 10 times more than the FT.com. But the Journal's online subscription revenues are growing by 15 per cent a year – at best. Digital advertising is growing at 25 per cent a year in the US. By putting a paywall around its online content, the Journal appears to be restricting its growth potential.
Hard thinking, tough management and deep pockets will be required to turn the Journal into a real cross-platform proposition. None of these appear to be a speciality among the fourth- and fifth-generation Bancrofts.
Murdoch understands this. Nearly three decades ago, in a similar context, he did the deal that defined his career – with Kenneth Thomson, the second-generation owner of Times Newspapers.
Thomson despaired when confronted by the equally intractable challenge of union power. He solved the problem by selling out. The way in which a youthful Tony O'Reilly snapped up the Irish Independent in 1973 resembles the Bancrofts' situation even more directly.
O'Reilly grabbed his opportunity as the last direct heirs of William Martin Murphy, who founded the Independent in 1905, died off. The original Murphy was an aggressive union-buster. His heirs weren't cut from quite the same cloth.
All the signs are that Dow Jones will go the same way, eventually. Last week, the naysayers were only able to deliver a 52 per cent majority against News Corp's bid. This suggests that Murdoch only needs to win a few more swing votes in order to triumph.
How would Murdoch deal with victory? If successful, he has pledged to step aside from running News Corp for a year so that he can re-invent the Wall Street Journal. It could be his final masterpiece.
Worryingly, some of his own shareholders believe that it could turn him into a latter-day Lear, wailing at the destructive power of the internet and counting the cost of a bid described by a former Bancroft family adviser as "absolutely, insanely high".
Peter Kirwan is editor of Fullrun, a subscription-based website for media and marketing people who work in technology – www.fullrun.com
Email pged@pressgazette.co.uk to point out mistakes, provide story tips or send in a letter for publication on our "Letters Page" blog
