August 1, 2007
The Bancrofts Finally Sell: Wachtell Profits
Dow Jones & Company announced that it has agreed to be acquired in a merger transaction by Rupert Murdoch's News Corp. for approximately $5.6 billion (see also the Bancroft family statement here). News Corp. will pay $60 in cash for each share of Dow Jones common stock and Class B common stock. Members of the Bancroft family and their trusts collectively owning approximately 37% of Dow Jones' voting stock have agreed to vote in favor of the transaction. The agreement also permits up to 250 holders of record and not more than 10% of the shares of Dow Jones to elect to convert their Dow Jones shares into a number of exchangeable Class B units of Newco LLC, a newly formed subsidiary of News Corporation. This will permit these holders to defer taxable gains until the shares are exchanged for News Corp. stock. Once the merger agreement and the voting agreement are filed with the SEC I'll have more commentary on any other interesting terms of the transaction. In the interim and not surprisingly, both the Wall Street Journal and the New York Times are all over this story.
Congratulations must go to Rupert Murdoch and his counsel Skadden Arps for getting to an agreement in an incredibly complicated, political deal (Dealbook has a blow-by-blow here). There are a number of M&A lessons to learn from this transaction. But a major one is the fragility of dual-class stock as a controlling structure over future generations in the absence of a strong leader. The New York Times has it in the form of Arthur Ochs Schulzberger Jr, but the Wall Street Journal lacked a similarly strong presence. The Bancroft family therefore not only failed to manage Dow Jones over the past years but also failed to collectively and meaningfully respond to Murdoch's surprise bid (For more on this distinction, see my post Why The New York Times is Not Dow Jones).
And regardless of whether the Bancrofts won or lost here, their advisers Wachtell, Lipton and Merill Lynch have been reported to be about to profit handsomely on this deal. In a last minute attempt to obtain the consent of the Bancroft family, Dow Jones agreed to pay their fees associated with the transaction up to the amount of $30 million. According to the Wall Street Journal, Wachtell is now in line to receive $10 million and Merrill $18.5 million. Not bad for what appears to be a limited amount of work which ultimately left the Bancrofts criticized for a lack of strategy and a failure to obtain a higher price.
For more on Dow Jones, see my prior posts:
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