Wednesday, July 18, 2007
Yesterday, the Dow Jones & Company announced that its Board of Directors had determined that it would be prepared to approve and recommend an agreement to merge with News Corporation (See also the News Corp. statement here). The agreement would provide that News Corp. pay $60 per share in cash per share of common stock and Class B common stock. The draft merger agreement also contemplates that Dow Jones stockholders could elect on a limited basis to receive equity securities in the News Corporation subsidiary that will hold Dow Jones. This provision is for tax reasons and in order to permit shareholders to defer capital gains taxes. These equity securities would be exchangeable for shares of Class A common stock of News Corporation. No details were provided concerning the post-transaction editorial arrangements for the Wall Street Journal (but see a draft of an agreement here). According to the Wall Street Journal, Leslie Hill, a member of the Bancroft family, and Dieter von Holtzbrinck abstained from the vote, while Christopher Bancroft -- who has been actively seeking alternatives to the News Corp. bid -- left the meeting early.
This pre-step of board approval without an immediate signed agreement is almost certainly due to disorder and uncertainty among the Bancrofts, the family currently controlling Dow Jones. Typically, the board of a potential acquiree will agree to and approve the agreement and immediately thereafter, it will be signed. At this time any controlling or significant shareholders will sign voting or tender agreements. The usual procedure failing to occur means that the Dow Jones board has taken control of this takeover process. In the absence of a coordinated response among the Bancrofts, the board has instead decided to makes its own decision, put a deal to the Bancrofts and see if enough family members can agree.