JERRYCHA STEELE is, potentially, one of The Wall Street Journal’s most
important readers. On the surface she doesn’t look like one.
On her MySpace page she can be seen dressed in a short skirt and fishnet
tights. The 30-year-old plays roller-derby – a fast and furious form of
hockey on roller skates – and has a penchant for shoes and hand-bags, “blue
shark Martinis” and Diet Mountain Dew. She has a tattoo on the base of her
spine and a pierced belly button.
Alongside family, friends, dancing, snow-mobiling and animals, she also lists
fast boats among her interests; which is just as well as her husband, Jeff
Stevenson, 38, is a champion powerboat racer and the owner/ driver of JBS
Racing.
Jeff is also a Bancroft, scion of the founders of Dow Jones, the media firm
that owns The Wall Street Journal.
There’s no mention of The Wall Street Journal on his wife’s web page. And, via
e-mail, Jeff, grandson of former Dow Jones board member Jane Bancroft Cook,
says he doesn’t read America’s leading financial newspaper. He’s
busy getting his boat together and looking for sponsors.
But in the coming weeks the Stevensons and the rest of the far-flung Bancroft
family will decide the future of America’s leading business paper.
The Bancrofts face a dilemma. For the past 92 years members of the
increasingly disparate clan have controlled Dow Jones, only occasionally
clashing among themselves over its future. The last two years have been
relatively peaceful; but last week the heat was turned up as Rupert Murdoch,
chairman of News Corporation, ultimate owner of The Sunday Times, made an
offer for Dow Jones that sent the company’s shares rocketing.
The $5 billion (£2.5 billion) offer, $56 a share, doubled the value of the
family’s holding overnight. Now the Stevensons and the rest of the Bancroft
dynasty must decide whether to sell the family silver and become, in the
words of one Bancroft, “just another rich family”, or hold on to their
prestigious inheritance and risk forfeiting the payday of a lifetime.
“This weekend you can bet there are going to be a lot of wives telling their
husbands it’s time to sell,” said one nonfamily shareholder, Mark Boyar of
Boyar Asset Management. “The longer this goes on, the more likely that the
Bancrofts will sell out,” he predicts.
Bancroft trusts, representing three dozen or so members of the family, own
24.7% of Dow Jones’s stock but control 64.2% of the votes through class B
shares with special voting rights.
After a board meeting last Wednesday in the Seagram building in Manhattan, Dow
Jones’s board announced that shares representing 52% of the company’s
overall voting power favoured rejecting the bid.
The board stopped short of an outright rejection and the company said it would
take no immediate action. The nondecision leaves a knotty problem for the
board and its shareholders as they seek to untangle their duties, interests
and allegiances. Younger generations of Bancrofts and other shareholders
seem eager to sell the company while others believe they have a duty to act
as guardians of one of America’s greatest institutions.
The ripples from Murdoch’s bid are still making their way through the
Bancroft clan. Stevenson is not the only Bancroft with a nautical bent;
another, Martha Robes, spends much of the year on a boat. The other
Bancrofts reside everywhere from Hawaii to Rome.
Unlike other big newspaper families, such as the New York Times’s Sulzbergers
and The Washington Post’s Grahams, the Bancrofts have no official leader.
Boston-based lawyer Michael Elefante is their primary spokesman. He did not
return calls seeking comment this weekend.
No Bancroft has run the Dow Jones Company for 75 years, but three family
members sit on the Dow Jones board: Christopher Bancroft, 55, who heads the
family trusts, is a Texas philanthropist and successful private investor;
Elizabeth Steele, 58, has been on the board since 2001; and Leslie Hill, 53,
a former American Airlines pilot.
While they have largely been loyal to current management they do not speak for
the whole family.
Via e-mail Jeff Stevenson told The Sunday Times: “I personally am not that
involved with the whole family situation. I probably would sell my DJ stock
– I don’t have a problem with it.” So far Stevenson is in the minority –
just. A higher offer could soon shift the balance.
At least one outside shareholder has already cashed in on the deal. Boyar
Asset Management sold 140,000 shares last week as Dow Jones’s stock soared.
Boyar kept hold of a further 140,000 shares in the hope that the offer may
improve.
“This decision to sell should have been made years ago,” said Boyar, a
longtime critic of Dow Jones’s management. He said he was hoping another
offer might material-ise or that Murdoch would increase his bid in order to
win over the Bancrofts.
The New York Times has twice approached Dow Jones, although its shareholders
might baulk at the price News Corporation is offering.
In the past some Bancroft family members have indicated they would look
favourably on a deal with The Washington Post. Analysts doubt private-equity
buyers would be tempted to outbid News Corporation, but with an asset of
this calibre buyers can appear from the strangest places.
“There’s never going to be another national newspaper launched in America,”
said one media executive. Buying The Wall Street Journal is a
once-in-a-lifetime deal.
Newspapers have long been out of favour on Wall Street. The internet has taken
readers, and advertising has migrated to sites such as Google, Yahoo and
Craigslist.
Even within News Corporation some have been surprised at the opening price
Murdoch put on the table for Dow Jones.
Last week Murdoch told The New York Times his offer was meant “to get the
attention of the owners” and acknowledged that some of his own board members
shared the view that it was “insanely high”. But the purchase would benefit
both the Journal and News Corporation in the long run, he argued.
In Britain, News Corporation owns several bestselling newspapers, including
The Sunday Times and The Sun. In America it is best known as the owner of
the cable news channel Fox and the New York Post.
Mort Zuckerman, publisher of the Post’s rival, The Daily News, said the bid
was “a brilliant move”. News Corporation was set to launch a business
television-news channel and the Journal’s gravitas would give it an enormous
boost, he said.
He said the buy would also further News Corporation’s online ambitions. Dow
Jones has more than 1m paying subscribers for its websites.
“The Wall Street Journal probably has the most intelligent internet strategy
of any of the major papers because you have to pay for it. They have over
750,000 paying subscribers,” said Zuckerman.
He added that the Journal’s role as America’s leading business title made it
less susceptible to declines in classified and other advertising areas that
were hitting rival titles.
“There are not too many options when it comes to business advertising; in a
sense the Journal is unique,” he said.
Along with The Wall Street Journal, Dow Jones’s other assets include Barron’s
magazine, Dow Jones Newswires, the Factiva data-base and the financial
website Market-Watch. It also provides news content to the financial-news
channel CNBC and radio stations across America.
“The question is, is this a trophy asset?” said one senior media figure. “Or
if you graft all that on to News Corp, do you enhance the value of the
business? I suspect the answer is that you do.”
Other analysts have been more sceptical. Unlike the fast-growing MySpace.com,
which Murdoch bought for $580m, Dow Jones is considered “old media” with
only modest growth potential.
News Corporation’s offer is 16.5 times 2007 earnings before interest, taxes,
depreciation and amortisation (ebitda), according to UBS analyst Michael
Morris. It’s a valuation that puts Dow Jones on the sort of multiples
enjoyed by Yahoo and far in excess of the mid-single-figure multiples
generally assigned to newspaper groups such as The New York Times or The
Washington Post.
Pali Research analyst Richard Greenfield argues the comparisons miss the point.
“We fundamentally do not like the newspaper business and have long criticised
News Corp for their continued ownership of newspapers. Dow Jones, and more
importantly The Wall Street Journal, is far more than a newspaper company,
it is a global content-creation company that monetises its content over an
increasing array of distribution platforms,” Greenfield wrote in a note to
investors.
He added that the Journal stands out because so many subscribers are prepared
to pay for its content online. “A key reason to own News Corp is because of
Mr Murdoch’s vision and willingness to place bets to build value, regardless
of what investors believe at any given time.”
But more than Wall Street, it is the family that Murdoch needs to convince.
Last week staff at the Journal began lobbying the Bancrofts to reject the bid.
The staff have been highly critical of their own management in recent years
and have even taken strike action – something their editorial pages would
never condone. But the paper’s union leader claimed last week that staff
“from top to bottom” were against the takeover.
Opposition to Murdoch’s offer got a boost following reports that another large
shareholder, the Ottaway family, is firmly opposed to selling. The Ottaways
own 6.2% of the company’s class B shares and acquired their interest after
selling their chain of local newspapers to Dow Jones in 1970.
Even with the Ottaways’ opposition the stock markets seem to be betting that
Dow Jones will be sold. On Friday the company’s shares closed at $55.77 a
share, up from $36.33 the day before the news broke.
“Murdoch has a long-term strategic vision in this business,” said Zuckerman.
“In the short term he’s prepared to take losses. I think he’ll get it. I
don’t think anyone else will be willing to pay the price he’s willing to
pay.”
ANATOMY OF DOW JONES
Publications The Wall Street Journal, Barron’s, Market Watch, Smart
Money (half-interest), Ottaway newspapers
Other titles Dow Jones indexes, Dow Jones newswires, Factiva
Shareholders The Bancroft trusts, representing about three dozen
members of the family, own 24.7% of the stock but control 64.2% of the
votes. Other major shareholders are the Ottaway family (6.2%) and the
institutional investors Fidelity Investments, T Rowe Price and Hotchkis &
Wiley Capital Management
Market value $4.7 billion (£2.4 billion)
Net income $386m
Employees 4,700
Key members of the board Peter McPherson, chairman; Michael Elefante,
Bancroft family lawyer and director; Leslie Hill, Christopher Bancroft,
Elizabeth Steele, family members
