the bancrofts’ tough choice

Posted on June 16, 2007

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Pearson, the owner of Europe’s top business newspaper the Financial Times, is said to be in talks with US conglomerate General Electric to hammer out a deal to jointly buy Dow Jones, whose crown jewels is the US newspaper powerhouse, the Wall Street Journal.

Pearson and General Electric are looking into the possibility of launching a bid to foil Rupert Murdoch’s takeover attempt of Dow Jones with his $6 billion offer made last month.

Dow Jones’ controlling shareholders, the Bancroft family, meanwhile is looking at ways to make unsavory Murdoch’s bid more palatable.

They must be wishing and hoping that companies like Pearson and General Electric would hurry up and throw them a bone.

The Bancrofts are faced with tough choices — hold their noses, take Murdoch’s money and run as they’re unlikely to get another offer so attractive. Or watch the share price of Dow Jones go down eventually if they reject Murdoch’s offer. Or keep praying and hoping for a much more acceptable offer, such as from white knights.

Who can blame them?

The Bancrofts certainly don’t want to be remembered as the ones who sold out, choosing a tidy profit over safeguarding the journalistic integrity of one of the most respected newspapers in the world.

Which self-respecting journalism outlet would honestly want to be bought over by Murdoch, the king of shrill, low-brow and populist media, a la the New York Post in the US and News of the World in the UK?

Murdoch is famously meddling in his newspapers’ editorial line. So the Bancrofts rightly fear the loss of integrity and editorial independence of the WSJ under Murdoch’s reign.

On the other hand, the Pearson and General Electric bid, if it comes to pass, would make a lot more sense for the Bancrofts.

Besides the much more respectable reputations of those two companies in the handling of their journalism units, there is plenty of synergy and good fit between the Pearson-GE-Dow Jones merger.

Pearson, who’s strong in Europe through the FT, would complement the WSJ’s dominance in the US. Together, both could conquer the rest of the business reporting world in Asia and Latin America. The only thing they would have to work through is their editorial styles, which is not an easy task but neither is it impossible.

Together with General Electric, the owner of top business channel CNBC, in the mix, the three partners could make a formidable business news team, leading in the print and broadcast areas and being more than able to take on rivals in business news such as Bloomberg and Thomson-Reuters.

GE, with its deep pockets and the motivation to defend its highly-successful CNBC, ought to think hard about cementing its partnership with Dow Jones. This would thwart Murdoch’s grasp of Dow Jones and using its resources to rival CNBC through his upcoming business news channel under the Fox Network banner.

The $60 per share offer that Murdoch threw on the table is financially daunting, even for a giant like GE. It was rumored to have held talks earlier with Microsoft for a joint bid against Murdoch but the high price was insurmountable, leading both Microsoft and GE to abandon talks. Perhaps this time, with Pearson, GE could work something out that would not only be a relief to the Bancrofts and the staff of WSJ, but also stymie Murdoch’s plans.

The WSJ needs to remain authoritative and respected. With Murdoch’s track record, it would not be easy for the WSJ to remain so once it is under his thumb. The WSJ’s integrity and independence stand a much better chance if the Pearson-GE talks succeed and a counter-bid against Murdoch successfully occurs.

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