Murdoch bid is alive as board holds sway

Billionaire Rupert Murdoch’s odds of landing Dow Jones & Co. increased substantially Wednesday, when the family that controls the financial publishing empire said it would defer to company directors in sale negotiations.

The Bancroft family also will stop crafting a proposal to protect the editorial independence of the company’s flagship property, the Wall Street Journal, a person close to the Bancrofts confirmed. Debate over that proposal within the family had slowed talks.

Because the Dow Jones board is obliged to pursue the best result for all shareholders, the handoff makes the $5-billion offer from Murdoch’s News Corp. harder to beat for potential rivals. Prospective suitors include London-based Pearson teamed with General Electric Co.

Murdoch’s $60-a-share bid represents a 65% premium to the price of Dow Jones shares before he made his offer. The stock rose more than 3% on Wednesday to $60.65.

A minority of the Bancroft family, which together holds 64% of the voting power at Dow Jones, wanted to sell to News Corp. when the offer became public last month. Others reject a sale to the controversial press baron at any price, and many in the middle would sell only with a binding agreement to keep Murdoch from changing news coverage to suit his business and ideological interests.

The Bancrofts all had hoped to return to Murdoch with an ethics plan last week. But after a logjam developed and the nearly three dozen members of the fractious clan failed to unite around the plan, the four family representatives on the Dow Jones board turned over their draft to all the directors at a regular board meeting Wednesday.

The family leaders and Dow Jones said in prepared statements that they had jointly decided that the full board should take the lead in negotiating with News Corp., entertaining rival offers or deciding to remain independent. Dow Jones said the Bancrofts “reiterated that any transaction must include appropriate provisions with respect to journalistic and editorial independence and integrity.”

In taking control of the negotiations, the board is expected to “fine-tune” the ethics plan and use it in talks with News Corp., according to a person close to the process. But because the full board has a fiduciary duty to all shareholders, it is expected to be more concerned about getting top dollar than the Bancrofts have been.

“If they decide to sell the company, their legal obligation is to get the highest possible price,” said Charles Elson, director of the University of Delaware’s Weinberg Center for Corporate Governance.

News Corp. declined to comment, but allies speaking privately greeted the development with delight.

Some observers took the step as a sign that the Bancrofts were too divided to determine the fate of Dow Jones. If that’s true, the board has more power.

“The board’s active entry into the picture signals the family’s failure to resolve personal issues,” said industry analyst Paul Kagan, a News Corp. shareholder.

“Boards are expected to be more concerned with fiduciary duty towards stockholders and valuation methodology than on family values.”

Elson agreed that the family appeared to be splintering, though the extent was unclear.

“It all depends on how many votes the family can muster,” he said. “If they cannot muster more than 50%, then the board’s recommendation becomes critical.”

Even if the board supports a sale, the decision would remain subject to the approval of shareholders, including the Bancrofts.

With stalled talks expected to resume shortly, the pressure on potential rival bidders has increased. Before Wednesday, some opposed to Murdoch’s winning the top platform in U.S. financial journalism had hoped to strike a deal directly with the Bancrofts, possibly with a lower bid than News Corp.’s.

Pearson, which owns the Financial Times, a Journal competitor, is still working with GE to formulate a joint bid. GE owns cable TV business channel CNBC, and Murdoch hopes to use the Journal to help launch a competing channel. Pearson and GE would put the Financial Times, CNBC and Dow Jones together in a new company.

A union representing Dow Jones employees and advisor Ron Burkle, the Los Angeles billionaire investor, are also trying to find deep-pocketed allies for a bid.

In addition, Internet entrepreneur Brad Greenspan told the Dow Jones board Wednesday that he was willing to buy 25% of the company at the same $60 price offered by Murdoch. Greenspan has been an enemy of News Corp. since he accused it of underpaying for social networking phenomenon MySpace, which was developed at a company Greenspan headed.

The details of the Bancrofts’ ethics plan couldn’t be obtained late Wednesday. But a person familiar with it said it had evolved beyond an earlier draft that called for the creation of a five-member committee with the power to veto the firing and hiring of four top Dow Jones editors. The Bancrofts would appoint two of the members, and three would be jointly selected by the family and Murdoch.

Besides the Journal, the No. 2 U.S. daily in circulation after USA Today, and the Journal’s website, Dow Jones owns the weekly Barron’s, the MarketWatch website and electronic newswires.

In another potential News Corp. alliance, people close to the company said it broached the idea of trading MySpace for a 25% stake in Yahoo Inc., worth about $10 billion.

News Corp. insiders, however, were skeptical of such a deal succeeding in the wake of this week’s replacement of Yahoo CEO Terry Semel with co-founder Jerry Yang.

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joseph.menn@latimes.com