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Assuming that the Dow Jones board votes tonight or tomorrow to approve the company's sale to Rupert Murdoch, the final step would involve getting approval from representatives of the Bancroft family, which control 64 percent of Dow Jones stock. The WSJ reports this morning that Michael Elefante, the family's lead trustee, has scheduled a meeting for Thursday at which he would present the agreement and ask for their final vote. Elefante is expected to give the family several days to make a decision, according to the Journal, which means that there probably won't be a resolution until sometime next week.
So, what happens if the Bancrofts just say no? Douglas A. McIntyre at 24/7 Wall St. examines the possibilities, which start with a plunge in the stock price of Dow Jones (well, that's not a possibility, it's a certainty). When the dust settles, DJ stock could be trading at as low as $30 - that's even lower than when Murdoch came along - and that will lead to shareholder suits against DJ and the Bancrofts.
The most important aspect of a rejection of Murdoch's offer is that DJ management would have to present a plan to get the company's share price rising rapidly. In the last quarter, the company had operating income of $38 million on revenue of $507 million. It is hard to imagine that the company would keep its local media business, the Ottaway newspaper chain. It had revenue of $55 million in the most recent quarter and operating income of $5 million. Based on public company comparables it could certainly be sold of $225 million or more. And, costs would have to come way down in consumer media. That segment of the company is mostly made up of The Wall Street Journal. DJ would have several options, but expenses for this part of the firm would certainly have to drop by $25 million per annum for its margin to be decent. That assumes that revenue stays flat. Cutting costs at the Journal would probably involve cutting jobs or getting employees to work for less. It would also almost certainly require moving more readers to an internet platform to save money in paper and production.
McIntyre raise one other intriguing possibility: Dow Jones might buy the Financial Times from Pearson. Combining both papers would offer both properties significant savings in news, sales, and production costs. You might recall that Pearson briefly considered going after Dow Jones.
Mark Lacter created the LA Biz Observed blog in 2006. He posted
until the day before his death on Nov. 13, 2013.