Dow Jones bid still up in air

News Corp. appeared tantalizingly close to winning the support of enough members of the Bancroft family to succeed in its bid to acquire Dow Jones & Co., but not close enough to conclusively predict victory.

Family members and trusts representing more than 30 percent of the shareholder vote, enough to put the deal over the top, indicated to their lawyers that they would support the bid, but some of them had not yet delivered signed commitments and could still back away, according to people briefed on the matter, who were granted anonymity because they were not authorized to discuss it.

News Corp. has not said how many firmly committed votes it needs from the family before it will be confident enough in the outcome to proceed; people involved in the negotiations put the minimum figure at 30 percent to 34 percent of the overall shareholder vote.

The Ottaway family, longtime junior partners in Dow Jones, hold 7 percent of the shareholder vote and are opposed to the deal, and the Bancrofts, with 64 percent, were deeply divided, with a set of alliances that continued shifting until the last day.

That leaves 29 percent of the vote in outside hands, the great majority of which is expected to favor the deal. But it is hard to predict what fraction will vote against and how many shareholders simply will not vote, making it equally hard to be certain how many Bancroft shares News Corp. needs.

For Chairman and CEO Rupert Murdoch, a Dow Jones takeover would give him not only one of the world's great media trophy properties and a larger voice in national affairs, but also a ready source of material and credibility for his newest big gamble, the Fox Business Channel he plans to launch in October.

Dow Jones' centerpiece is The Wall Street Journal, with domestic circulation of more than 2 million six days a week, second only to USA Today, but the company also includes many other parts, such as Barron's magazine, Dow Jones Newswires, the MarketWatch Web site and Factiva, an electronic news archive and information service.

The Byzantine takeover fight, which already has dragged on for three months, took several more unorthodox turns Monday.

Monday night, well after the 5 p.m. Eastern time deadline for the Bancroft votes to be delivered to their Boston law firm, Hemenway & Barnes, there was still no firm answer from one set of family trusts.

Those trusts are controlled by another set of the family's lawyers, based in Denver, who were seeking a higher price for the super-voting Class B shares, owned primarily by the Bancrofts, than for common shares. Dow Jones management has firmly opposed such a premium.

Another complication emerged Monday as those Denver Trusts sought to have Dow Jones pay their fees and expenses for advisers and lawyers, which could run into the millions of dollars, according to people in involved in the talks.

The Denver trusts and several others have suggested that by having the company pay the family's fees and expenses, they would effectively receive a higher price for the super-voting shares. Dow Jones' board has adamantly opposed a two-tiered price.

Some people involved in the talks suggested that if Dow Jones was willing to pay the fees and expenses, some of the trusts would likely vote in favor of the deal.

Complicating the situation further was the revelation that Merrill Lynch, which had been representing the family on behalf of the Boston-based branch, had struck a deal for Dow Jones to pay its expenses, while advisers to other parts of the family had no such arrangement.

The arrangement with Merrill Lynch had some family members up in arms Monday, saying that it was a conflict of interest because Merrill Lynch had made repeated presentations to the entire family and was supposed to be unbiased.

Experts in trusts and estates said that if the Bancrofts rejected the offer, it might lead to a flurry of lawsuits pitting family members against each other. They said that people who want to sell but have little or no voting power over their shares could have strong cases against trustees, whether family members or not, who voted against the deal.

"The requirement for prudent investing by the trustees overrules the right to retain the Dow Jones stock," said William Zabel, a trusts and estates lawyer at the firm Schulte, Roth and Zabel. "The lack of any competing offer would appear to make it legally unreasonable for them not to sell."

Donald Hamburg, a trusts and estates lawyer at the firm Golenbock, Eiseman, Assor, Bell & Peskoe, said that "the answer to every trust question lies in the wording of the particular trust," and there could be provisions in the Bancroft trusts that give the trustees particular powers to do as they see fit.

But as a general matter, he said, "a trustee has to vote in the best interests of the entire group of beneficiaries," and turning down a windfall could easily be seen as a violation of that principle. Even younger members of the family who are not current beneficiaries, but would inherit interests in the trusts, would have standing to sue, he said.

source:seattlepi.nwsource.com