News Corporation's Acquisition of Dow Jones
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Case Code: BSTR301 Case Length: 20 Pages Period: 2007-2008 Pub Date: 2009 Teaching Note: Available |
Price: Rs.400 Organization: News Corporation, Dow Jones Industry: Media & Newspaper Publishing Countries: Global; USA Themes: Growth Strategy, Merger & Acquisitions, Corporate Valuation |
Abstract Case Intro 1 Case Intro 2 Excerpts
"[The Wall Street Journal], for all its cachet and influence, is at best marginally profitable; the profits of its parent, Dow Jones, come primarily from electronic data distribution. But the Journal, financial laggard though it may be, is the primary reason that Rupert Murdoch and possibly other players are willing to pay $5 billion or more for Dow Jones."
- Allan Sloan, Newsweek's Wall Street editor.
"There are a lot of entities that would like to own Dow Jones; the question is at what price? It's pretty clear the board doesn't want to sell to Murdoch. Their problem is that Murdoch's bid is so attractive from a valuation perspective that it will be difficult for anyone else to pay $60 a share."
- Michael Chren, Managing Director, Allegiant Asset Management Co.
Introduction
On August 1, 2007, Dow Jones & Co., Inc. (Dow Jones) and News Corporation (News Corp.) announced in a joint statement that they had signed a merger agreement. Under the agreement, News Corp. would acquire Dow Jones for US$5.6 billion. The announcement of the merger put an end to the three months of bickering between the Bancroft family, which owned a major stake in Dow Jones, and News Corp. over the sale of the stake. The Bancroft family and other stakeholders in Dow Jones had initially rejected the merger proposal, reportedly due to a widespread perception that News Corp. used its publications for promoting its own interests.
The merger also created a rift between the Bancroft family and the employees of The Wall Street Journal (WSJ), Dow Jones' flagship publication. The transaction was completed after getting the shareholder approval on the merger agreement at a specially convened meeting on December 13, 2007.
The acquisition brought the New York City-based WSJ under the control of News Corp. WSJ was the largest circulated and one of the most prestigious financial dailies in the world. With the acquisition, Rupert Murdoch (Murdoch), Chairman and CEO of News Corp., added this top financial daily to his media empire.
The merger attracted criticism from various quarters, right from the time News Corp. first made the merger proposal on April 17, 2007.
The acquisition gave News Corp. a ticket into the world of financial news business. Analysts also felt that it would add some credibility to News Corp. in the media and publishing world.
Murdoch planned to increase the reach of WSJ by certain steps like more aggressive expansion into some other lucrative international markets like Asia.
The main reason for the acquisition of Dow Jones, according to analysts, was to tap into the influential business daily market and also take on the other leading financial daily in the world, the London-based Financial Times...
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