15 May 2007

Murdoch's WSJ Bid: Blood On The Floor?

When 19th Century Boston whalers went to sea, they entrusted their affairs not to their wives, but to their lawyers. Today, one of those old Boston law firms, Hemenway & Barnes, may hold the future of the Wall Street Journal in its hands:
Laurence Lombard, a senior partner at Hemenway, first drew the Bancrofts to the firm, then passed the assignment to his successor, Roy Hammer. The family soon became the firm's biggest client, according to a 1997 profile in The American Lawyer...

Mr Hammer's power was enhanced because the Bancrofts – unlike some other newspaper families – had no interest in running the company themselves. "They had the final say, the Hemenway & Barnes people," a person who has worked with the Bancrofts said.

That clout passed to Mr Elefante, a graduate of Harvard Law School, after Mr Hammer retired two years ago... Ultimately, Mr Elefante's counsel could have as much bearing on Hemenway & Barnes as it does on Dow Jones.
Hemenway & Barnes oversees the trusts through which the Bancrofts control a majority of the Dow Jones company's class B voting shares. Dow Jones owns WSJ. Murdoch wants both. But Mr Elefante may be legally forced to advise the Bancrofts to reject the bid:
Among other things, Mr Elefante will have to balance the media mogul's bid, and its 65 per cent premium, against the dictates of decades-old trusts, which are believed to include language that calls for the preservation of the company's journalistic integrity.
Theoretically, a disgruntled Bancroft family member could block any acceptance of Murdoch's offer on the basis that he lacks "journalistic integrity". Now that could trigger a very interesting law case!

In any case, Rupert's efforts to woo the Bancroft family are not going well (and it seems his China Connections are an important part of the problem). The UK Telegraph is now reporting that the Bancroft family meeting has ended with a decision to reject Murdoch's WSJ offer:
The Bancroft family is believed to have rejected fresh overtures from Rupert Murdoch to meet with them to discuss the News Corp chairman's $5bn (£2.52bn) bid for Dow Jones.

Key members of the far-flung clan convened by teleconference to discuss Mr Murdoch's offer after receiving another letter from the media tycoon designed to assuage their concerns over his possible ownership of The Wall Street Journal.

However, the family is understood to have seen nothing new in the letter and viewed it as unlikely to soften the opposition among many family members to a takeover by Mr Murdoch.
The Dow Jones index is soaring, but the company's own shares are already down 50%. News of this rejection could send them lower still. And Murdoch has already issued a quiet warning about what happens if the Bancrofts turn him down:
“It would be ugly".
Expect to see more blood on the floor soon.