Murdoch and Dow Jones: How The Deal Got Done

While Rupert Murdoch finally won his long-coveted prize — gaining enough support from the deeply divided Bancroft family to buy Dow Jones & Company, publisher of The Wall Street Journal — closing the $5 billion deal was a marathon of conference calls and all-nighters for those involved in the deal-making process.

Following four months of back-and-forth, during which some three dozen members of the family engaged in an intense, sometimes tearful debate about The Journal’s future, the boards of both Dow Jones and Mr. Murdoch’s News Corporation voted Tuesday night to approve the deal.

In a press release early Wednesday, Dow Jones said it had signed a “definitive merger agreement” under which it would be acquired by News Corp.

Speaking to The Times, James B. Lee of J.P. Morgan Chase & Company, who has represented clients in some of the biggest deals in history, said of Mr. Murdoch: “Nobody else I have ever banked could have pulled it off.”

With 64 percent of Dow Jones’s voting power in their hands, the Bancroft family seemed to be in a powerful position early in the process. But The Financial Times’s Lex column suggests they were vastly outgunned by Mr. Murdoch from the start. “It was a mismatch of arch-dealmaker against a group of amateurs,” Lex wrote.

The New York Times’s David Carr, writing in his Media Equation column, describes Mr. Murdoch’s success as “a reminder that the unthinkable is often doable, given the loot and the will.”

The merger dance began in earnest in April, when, after some early reconnaissance, Mr. Murdoch decided the time was right to make his move on Dow Jones. On April 17, a messenger delivered to Dow Jones his offer to buy the company for $60 per share.

Martin Lipton, the veteran takeover lawyer, advised the Bancroft family in the often contentious negotiations, frequently “threading the needle to get to a compromise,” a person who worked with him told The Journal. Some were concerned, though, that he was pushing too hard to get a deal done despite the family’s reservations, The Journal wrote.

The Times notes that the final decision was in doubt well past the 5 p.m. Monday deadline set for the family. In a twist in the already tortured negotiations, some family trustees apparently demanded that the News Corporation pay the fees for the family’s bankers and lawyers — which could reach $40 million — in return for their support. After an exhausting night of conferences calls, the deal was made.

Late last week, it appeared that the family might reject the deal, but then two pivotal family elders who had argued against the deal, Jane Cox MacElree and her brother, William C. Cox Jr., shifted positions; she relinquished voting control of some shares, and he switched sides and decided to support the sale, people close to the family said. That left things too close to call.

While the weeks after May 2 had been spent arguing over principles, the last few days were spent haggling over money. Before the deal had a clear majority in support, a lawyer for the family, Lynn Hendrix, based in Denver, who controlled trusts with 9 percent of the overall vote, insisted that those trusts would oppose the deal unless the News Corporation agreed to pay a premium for the supervoting shares that are mostly owned by the Bancrofts.

On Sunday night, David F. DeVoe, the News Corporation’s chief financial officer and a board member, called Mr. Hendrix, a partner at the firm Holme, Roberts & Owen, to draw a line in the sand.

Referring to the $60 price, Mr. DeVoe said, “I can do six-zero-point-zero-zero,” a person briefed on the conversation told The Times, “not six-zero-point-zero-one.”

When Mr. Hendrix kept pushing for more money, Mr. DeVoe made an unusual offer: the News Corporation would consider paying the fees and expenses of the bankers and lawyers advising the trusts. That amounted to an indirect way of sweetening the offer for the supervoting shares without adding much to the cost of the deal. Dow Jones, after consulting with the News Corporation, had already agreed to cover some of the costs of paying Merrill Lynch, the family’s primary financial advisers.

After a marathon series of conference calls that night that ran through Monday, involving Mr. Devoe; Mr. Hendrix; Michael B. Elefante, the family’s primary lawyer and trustee; and Richard Beattie, a lawyer advising the Dow Jones board, a deal was brokered that would allow the Denver trust to vote in favor. The News Corporation agreed to pay advisory expenses for all of the family trusts, a figure that people involved in the talks told The Times could reach $40 million, which translates to about an additional $2 a share for the Bancrofts.

The largest share, perhaps as much as $18.5 million, will be paid to Merrill Lynch, according to the Times. Another payment of as much as $10 million is expected to be paid to Wachtell, Lipton, Rosen & Katz, a law firm representing the family. Morgan Stanley, which advised the Denver trusts, and a series of law firms are expected to split the rest.

The issue of the News Corporation and Dow Jones paying the family’s advisers has raised questions in some circles — including among some family members, The Times said — about the advice’s impartiality. Merrill Lynch, in particular, was viewed as an early supporter of the deal and was responsible in large part for making presentations to the family about the current and future health of Dow Jones.

The deal is also a windfall for an army of Mr. Murdoch’s bankers and lawyers. Mr. Murdoch was advised by Mr. Lee, who had helped Mr. Murdoch when he explored a bid for Dow Jones in 2001 and had set up Mr. Murdoch’s first introduction to Dow Jones’s chief executive, Richard F. Zannino.

Blair Effron, a former banker at UBS who started his own boutique firm, Centerview Partners, spent many nights holed up at Mr. Murdoch’s headquarters, as did Stanley S. Shuman of Allen & Co., the media investment bank.

By late yesterday, according to the Times, family trusts and family members representing about 40 percent of the total shareholder vote had committed, at least verbally, to support the deal, more than enough to put it over the top in a shareholder vote. Neither Dow Jones nor the News Corporation would officially confirm that, heading into a 7 p.m. Dow Jones board meeting.

To the last, people inside and outside Dow Jones who opposed the sale were trying to arrange alternative deals that would allow some Bancroft family members to sell and others to keep control of the company.

And Tuesday, those who opposed the deal were left with a sour taste in their mouth.

“It’s a bad thing for Dow Jones and American journalism that the Bancroft family could not resist Rupert Murdoch’s generous offer,” James H. Ottaway Jr., a former Dow Jones executive and a major shareholder, told The Times. “I hope Rupert Murdoch, and whoever follows him at News Corporation, will keep his promises to protect and invest in the unique quality and integrity of The Wall Street Journal, Barron’s and all the Dow Jones electronic news services.”

Leslie Hill, a family member and trustee who became something of a patron saint within the Journal’s newsroom for her opposition to the deal, resigned from the company’s board late Tuesday.

News Corp.’s board signed off on the deal at a late-afternoon meeting, The Journal said — and then top executives and advisers toasted their coup with an Australian Shiraz.


source: The New York Times