Thursday, May 3, 2007
Still lots of ink today (electronic and otherwise) on News Corp.'s $5 billion dollar offer to acquire Dow Jones, publisher of the Wall Street Journal. My favorite is that both the New York Times and the Wall Street Journal run pieces on possible life for the Journal under News Corp.'s CEO and controlling shareholder, Rupert Murdoch (see also Dealscape's more clever comment on branding).
The New York Times can sleep safer under the protective aura of the Sulzberger family who, through a dual-class voting scheme, control the New York Times. The Sulzberger's have a stockholder voting arrangement which ensures that they vote in harmony on such decisions. The Bancroft family which controls 62% of the voting interests in Dow Jones does not have such arrangement. But yesterday, Dow Jones issued a statement that Bancroft family members controlling 52% of the voting interests in Dow Jones opposed the offer; therefore the Dow Jones Board was not acting at this moment. The family is not obligated under Delaware law (where Dow Jones is organized) to initiate a sale process; and, given that a majority of the family refuses to do so, the Dow Jones Board was not in Revlon- mode and its refusal to act justified under the business judgement rule (though this point is a bit more nuanced than I am putting it, see posts on this at Bainbridge, Truth on the Market and the Conglomerate).
The media is now rife with speculation over whether Murdoch can pick off some of the Bancroft family shareholders (and some WSJ staffers are mounting a counter-attack according to Dealbreaker). My question is, where are the 13D amendments (an SEC filing required by any shareholder who owns more than 5% of the voting interests in a company)? Much of the Bancroft holdings are held in trusts administered by the small Boston law firm of Hemenway & Barnes. A number of these Bancroft trusts hold more than 5% of the company and have filed Schedule 13Ds. These require under item 4 disclosure of any plans or proposals with respect to the securities held by the trust. Any change of intentions must be promptly disclosed. A quick look at Edgar shows that no 13D amendments have been filed since the offer was announced (and looking at the family's previously filed 13Ds shows some poor choice of drafting language for this disclosure: see an example here).
If the family is indeed having discussions, it would be prudent for them to amend their 13Ds (the amendments must be filed promptly after a change of intent). If they have not, this is a good time to amend and update their disclosure (message to Wachtell who is representing the family). In any event, watch those 13Ds to see if some of the larger family members are actually picked off . . . .
NB. Another practice point that some of the more experienced may have picked up. The family has not yet filed as a "group" for purposes of Schedule 13D. They (and their trusts) file individually and largely disclaim that they are acting as a group. However, depending on their actions they may subsequently be deemed to be acting in concert and so required to file a collective 13D (in fact, they may colorably already be doing so in their collective response to the Dow Jones board). Avoiding this trap is another way for those fine Wachtell lawyers to earn their fee. . . .
Update: The day after I posted this the Bancroft family did indeed file their 13D Amendments (the link is to one of them). The full language of the amendment is worth setting out:
Since the time that members of the Bancroft family and trustees of trusts holding shares of the Issuer for the benefit of members of the Bancroft family were first advised of the possibility of a proposal by News Corporation to acquire the Issuer, various members of the family and trustees have been discussing whether they would be interested in the transaction proposed by News Corporation. To aid the family members and trustees in their decision-making process, on April 24, 2007, Merrill Lynch made a presentation to members of the family and trustees. Various discussions and communications among family members and trustees continued to ensue as to whether they would be interested in the proposed transaction. On May 1, 2007, it became apparent that family members and trustees holding a majority of the voting power of the Issuer were not interested in the News Corporation proposal and would vote the shares of the Issuer over which they have voting control against any transaction reflecting the terms of the proposal. The Issuer and its board of directors were so advised, and the Issuer made an announcement to that effect on May 1, 2007.
As a result of the matters described above, the undersigned may be deemed to constitute a "group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) with other members of the Bancroft family and Bancroft trustees who were not interested in the News Corporation proposal. The undersigned hereby (i) disclaims any membership in any such group, (ii) does not affirm the existence of such a group, and (iii) except as otherwise may be expressly indicated in this Schedule 13D, disclaims any beneficial ownership of any shares of the Issuer that may be or are beneficially owned by, among others, other members of the family or trustees.