Dow Jones Board Approves Deal

Vote Could Pressure Family;
Christopher Bancroft
Leaves Meeting Early

By SARAH ELLISON, MATTHEW KARNITSCHNIG and DENNIS K. BERMAN
July 18, 2007; Page A2

The board of Dow Jones & Co. voted to approve News Corp.'s $5 billion bid for the company last night, with two directors abstaining from the vote and one leaving the meeting early, according to people familiar with the matter.

Leslie Hill and Dieter von Holtzbrinck abstained from the vote, while Christopher Bancroft -- who has been actively seeking alternatives to the News Corp. bid -- left the meeting early, these people said.

The backing of the 16-member board sends the offer to the Bancroft family, which controls the majority voting shares of the company, for a final vote. The family is set to meet Monday and will be given several days to consider the deal. The board's endorsement puts some pressure on the Bancrofts to back a sale, but doesn't obligate family members -- who have been divided over the bid -- to do so.

The board of Dow Jones issued a statement saying it "would be prepared to approve, and recommend to the Dow Jones stockholders, including the Bancroft Family stockholders," the News Corp. proposal at $60 a share.

News Corp. said it was "grateful" to Dow Jones's board for its vote. Dow Jones also said in its statement that News Corp.'s board would authorize the deal if enough members of the Bancroft family "indicate promptly" their support for a deal by signing voting agreements.

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Heading into the meeting, Dow Jones, which publishes The Wall Street Journal, and advisers to the family saw family approval as too close to call, said people familiar with the situation. Family advisers estimated that they would need less than half of the family's voting power -- or about 30% of the total voting power in the company -- to win approval of a deal because they expected a high number of nonfamily holders would support the transaction.

News Corp. also indicated for the first time how it plans to pay for the deal, saying that shareholders can opt to receive designated News Corp. shares for their Dow Jones stock. Such exchanges can help ease the tax burden for shareholders.

Family members and company executives were hoping to extract a few extra dollars from the $60-a-share originally offered by News Corp. Chairman and Chief Executive Rupert Murdoch, but none was forthcoming at this stage. Pushback from the family could produce a slightly higher offer in the very final stages -- or scuttle a deal.

As of yesterday afternoon two of the company's family directors were actively engaged in pursuing alternatives to Mr. Murdoch, according to people familiar with the matter. Christopher Bancroft has been talking to Internet entrepreneur Brad Greenspan about a proposal to buy a portion of the company. Mr. Greenspan, who has talked to other family members, was working on a more detailed proposal to send to Dow Jones representatives yesterday and is looking for investors, according to a person familiar with the matter. Mr. Greenspan is working with advisers at New York firm Dinosaur Securities.

Mr. Bancroft serves as a trustee overseeing shares that account for about 15% of the company's total shareholder votes. Ms. Hill owns less than 1% of the company's voting power. Her mother, Jane Cox MacElree, serves as a trustee for or owns shares that account for about 15% of it.

The family initially rejected Mr. Murdoch's offer, only to reverse itself and agree to sit down and talk to him about six weeks ago.

After several weeks of delays occupied by negotiations on an editorial-independence agreement and due diligence, events quickened Monday when the heads of the two companies had lunch at News Corp. headquarters. Representing Dow Jones were Chief Executive Richard F. Zannino; company advisers; and two of the company's directors, Lewis B. Campbell, CEO of Textron Inc., and M. Peter McPherson, the board chairman.

Over a lunch of chicken breasts and salmon in a small corporate dining room, Mr. Murdoch looked confident and relaxed after attending a summit of media executives in Idaho last week, according to people familiar with the meeting. Mr. McPherson, Mr. Campbell and Mr. Zannino all said they were uncertain about the family's position, these people said. Mr. McPherson said the two sides had made progress in coming to an agreement on editorial principles to protect Dow Jones and that it would be a shame not to "get across the goal line" with the family, one of these people said. Each of the directors told Mr. Murdoch that the family's vote was difficult to call and that by raising his offer he would increase his chances of winning them over.

Mr. Murdoch listened to the directors' pleas but told them "it was hard enough to get my board to $60," according to a person familiar with the discussion. News Corp.'s total investment in Dow Jones would be much greater than the $5 billion value of the offer, given that News Corp. would have to take on Dow Jones's debt and medical liabilities, and make other investments in the company.

The two sides discussed how the family's vote would likely break down. Both said they expected about half of the family's vote was leaning in favor of a deal.

Later in the conversation, Mr. Murdoch raised a subject previously discussed between the two sides: the possibility of nominating Wall Street Journal Editor at Large Paul Steiger to News Corp.'s board of directors, these people said. The editorial-independence pact provides for a board seat, as well as five members of an independent board that would oversee the hiring and firing of three Dow Jones editors and otherwise have certain rights to protect editorial integrity.

Mr. Steiger, who stepped down as managing editor of The Journal this spring and is scheduled to retire from the company at the end of the year, said he hadn't been contacted about such a plan. "Nobody has talked to me about this," said Mr. Steiger, who continues to oversee The Journal's coverage of the deal.

The Bancroft family is expected to meet Monday in Boston, home base of Hemenway & Barnes, the law firm that manages most of the family's holdings and will conduct the voting process.

MORE

• Dow Jones's July 17 statement

• Complete Coverage: A Deal for Dow Jones?

• Graphic: Key Players in the Dow Jones Bid

The family poll won't be a simple head count. The firm is expected to conduct the vote according to the voting power of individual family members and trustees. While most family members own some shares directly, the vast majority of the family's stake is held in trust. Some family members own more stock than others or are beneficiaries of a larger portion of the family fortune. That means only a minority of the family is necessary to sell the company.

Michael B. Elefante, the family's lead trustee and a Dow Jones board member, will play a crucial role. Mr. Elefante, who some board members believe favors a deal, sits on most of the family's key trusts, and a number of family members have relied on his counsel in forming their own opinions on the offer. Mr. Elefante and a Hemenway & Barnes colleague, Kurt F. Somerville, are the only trustees on one of the family's biggest trusts.

Indeed, Mr. Elefante has told board colleagues he can deliver a little less than half of the family's 64% stake. That rough one-third of the company's voting power likely would be enough to cement a sale to Mr. Murdoch. That is because some 29% of the total voting power of the company rests in the hands of non-Bancrofts. Almost all of these holders, many of them arbitragers, are expected to support the deal.

Only 51% of the voting power is required for approval, but News Corp. will need to leave itself some extra margin, given a chunk of shares typically remain unvoted in merger situations.

It isn't clear how one major group of trusts, those managed by the Denver firm Holme Roberts & Owen, will vote. The firm, which manages trusts that control about 9.1% of the vote, is generally in favor of the deal, according to people familiar with the matter, but wants more money. It believes Mr. Murdoch should pay $66 per share, at least to holders of supervoting class B shares, according to these people. The firm isn't represented on the board directly and believes the family should be negotiating price because the board must represent the interests of all shareholders.

In addition to The Wall Street Journal and its international and online editions, Dow Jones publishes Barron's and SmartMoney magazines and other periodicals, DowJones Newswires, Dow Jones Indexes, and the Ottaway group of community newspapers.

News Corp. owns more than 100 papers in Australia, Britain, the U.S., Fiji and Papua New Guinea; Twentieth Century Fox Film; the Fox TV network; HarperCollins Publishers and the popular MySpace Internet site.