The Man Who Owns the News (54 page)

On the morning of July 16, there’s the first of several ritualistic assemblies that happen that day at the News offices. Mike Costa from Merrill Lynch (representing the Bancroft trusts), Greg Lee from Goldman Sachs (representing the Dow Jones board), and Rich Zannino sit down with News Corp.’s two top financial executives, Nallen and CFO Dave DeVoe. Costa, Lee, and Zannino have a clear message:
We can make this deal happen, we really can, if you give us more than sixty bucks
.

As a negotiating position, this one is about two months overdue.

DeVoe, giving the on-script negotiating response, says,
Sixty bucks, that’s the deal.
(Even if you’re going to fold, you don’t fold right away.)

Costa, Lee, and Zannino cool their heels while they wait for a lunch meeting at News Corp., where Murdoch and Lon Jacobs are due to join DeVoe and Nallen. Dow Jones chairman Peter McPherson will also be joining them, along with board member Lewis Campbell.

At lunch Nallen detects clear tension between Campbell, who the News Corp. people believe has been a consistent “reasonable” voice, and McPherson, whom the News Corp. people don’t trust. McPherson takes up the negotiating position, asking Murdoch if he’ll consider raising the bid. There is something too ritualistic about it all—it’s a going-through-the-motions move. It’s people exercising their “fiduciary responsibility”—a term McPherson seems to utter in almost every sentence. Murdoch says no, the offer is the offer. McPherson asks him to think about it. Murdoch, ritualistically, agrees.

The Dow Jones group returns, in something like slow motion, later in the afternoon to receive Murdoch’s formal response.

Murdoch gives a little talk about the process, about Dow Jones, and about how $60 is a full and fair offer.

And that’s it. The Dow Jonesers, in a good mood, thank Murdoch and leave. On the way out, Lewis Campbell tells Murdoch they’re there—basically there.

The next day, the seventeenth, the Dow Jones board votes to approve the offer and recommend it to its shareholders—with the understanding that if there is a “satisfactory” level of support from the Bancroft family, the board will review a definitive merger agreement. Leslie Hill and Dieter von Holtzbrinck, a board member since 2001, abstain from the vote (an outright “no” vote, they have been advised, might subject them to shareholders’ suits). Christopher Bancroft, still on the hustings for alternative buyers, recuses himself from the vote.

On July 19, von Holtzbrinck, while agreeing that the economics of the deal are very strong, says he can’t support the journalistic ethics of the deal and asks if he can disregard the economics and cast a no vote on the basis of the ethics. He’s advised that this would not be the appropriate, fiduciarily responsible thing to do. He resigns rather than cast a yes vote.

On July 20, having received the board’s approval, and by now confident that he has the minimum support he needs from the family, Murdoch sets a deadline: July 31.

At the seashore in Maine, Peter Kann has lunch at Martha Robes’ home. He’s there with his wife, Karen House, and their children, and with Robes and her sisters, Lisa Steele and Jean Stevenson, and their husbands and children. The elder Bill Cox is there with his wife. It’s a social and sentimental occasion. The old days of the
Journal
are the subject. It’s a valedictory moment: “Be proud of what your family did for all these generations,” is what Kann says, knowing the likelihood that Lisa Steele will carry her sisters into a vote for Murdoch. “All of us who worked for the company were appreciative—are appreciative—so whatever happens, don’t, you know, feel bad. Life goes on, or something like that,” is the substance of what Kann will recall he told the family members.

On July 23, the three branches of the Bancroft family assemble in Boston at the Hilton Hotel on Broad Street. It is to be their final meeting as shareholders in a family business—it is, too, quite likely their final meeting as a family. There are dozens of reporters in front of the hotel, creating a circus-like atmosphere that most of the Bancrofts find embarrassing and which adds to the levels of anger, emotionalism, and encirclement. This is a last stand. Chris Bancroft shows up wearing a hat that says “Bite Me.”

Murdoch is as well versed on the leanings of the various blocs within the family as anyone in the family. Indeed, by mid-July Andy Steginsky, whose Bancroft sources, not least of all Billy Cox, have continued to keep him closely informed, and who proves to be an astute vote counter, is speaking to Murdoch almost hourly. At this moment, as the Bancrofts begin their meeting, Steginsky’s in India, on a trip with his twenty-one-year-old son. As his son sleeps—it’s the middle of the night in India—Steginsky is locked in the hotel bathroom, listening in on the Bancroft conclave via an open cell phone. He’s reporting to Murdoch on a blow-by-blow basis.

Almost nothing has changed in the family’s fundamental discussion of the deal. For two months the argument has remained fixed. On one hand, there is the intractable financial picture of Dow Jones and the panacea of the $60 offer. On the other hand, there is Murdoch and the sense among many of the most vocal and most august members of the family that there must be an alternative—because what is the world worth without an alternative to Murdoch? If that’s
it,
if there is
only
Murdoch…

What has changed is how tired the family is, not just of the argument but of each other.

The meeting lasts for eight hours.

Merrill Lynch, once again, makes the main presentation. In many ways, it is simply a review of what has been, by now, reviewed over and over again. The presentation has hardened into something of a no-exit scenario. Once again: Not in anyone’s wildest imagination is there a way the company will ever return $60 a share in value. The Merrill Lynch presentation reviews the various alternatives to the Murdoch offer and explains why none of them is a realistic option—leaving only Murdoch’s offer.

Still, there is an odd hope. Or a stubborn hope. “Maybe there is some other scenario that is real, that we can say, ‘Okay, we can say no to Murdoch because there is this other alternative that is plausible,’” thinks one family member plaintively, going into the meeting. Even an offer with fewer dollars.

Lewis Campbell, representing the Dow Jones board, explains to the family why the board has decided to support the offer: In his business career he has never seen such a gap between price and value. In other words, it’s a no-brainer.

Michael Elefante gives a tortured rationale from the point of view of the trustees that combines both an argument about fiduciary responsibility—making the implicit point that he and his firm could be held accountable for making a bad economic decision and that, to be sure, Murdoch’s offer is the right economic decision—and another, more nuanced argument about the nature of the trust. While, certainly, one of the purposes of the trusts is to protect the independence of the
Wall Street Journal,
the trusts also make mention of the continued prosperity of the company. The family’s continuing relationship to the company might, in fact, be hurting the continued prosperity of the company. See?

Elefante’s partner at Hemenway and Barnes, Michael Puzo, reviews the terms of the editorial-protections agreement to which the family and Murdoch have agreed.

“How can you stop Rupert from interfering?” the elder Bill Cox demands to know. “Why would you sell a company to an owner where you need this kind of protection?” asks Cox’s sister, Jane MacElree.

Puzo says he believes, as do the
Journal
’s editors, that the agreement has “teeth.” Chris Bancroft makes the anti-Murdoch case, saying there’s just no pressing need to do this deal now, and, in fact, arguing that it isn’t a very good deal. He suggests that the premium isn’t such a great premium after tax. Leslie Hill then says that she had prepared a talk about why they shouldn’t sell, but that she’s decided not to give it. Instead she reads letters from reporters at the
Wall Street Journal
who have written her about their fears of what Murdoch will do to the institution.

Then Leslie’s mother, Jane McElree, the last matriarch, gives the day’s most emotional appeal. She brings up the terrible things she believes Murdoch has done in China, how he would do anything for business reasons (she’s gotten this mostly from reading the
Journal
and the
Times
), and then evokes Danny Pearl, the celebrated
Journal
reporter who was beheaded by terrorists in Pakistan in 2002, suggesting both that there won’t be any more fearless reporters like Pearl under Murdoch and that selling the paper is somehow a betrayal of Pearl’s memory and of his sacrifice. (Her sons are rather annoyed by their mother’s use of the Danny Pearl card.)

Michael Elefante distributes the voting agreements and establishes a deadline of a week hence, July 30, for their return.

The meeting finishes at eight o’clock that evening. Andy Steginksy, from India, tells Murdoch that it’s all gone rather well.

On July 27, as the Bancrofts consider their votes, one of the Hill brothers, Crawford, a biology teacher, sends an e-mail to each member of the Bancroft family, which reads in part:

It was I who jumped into the back seat of the limo that we grabbed to rush Gay [Jessie Cox] to Lenox Hill Hospital after her renowned collapse at the family dinner at “21” in April of 1982. In that back seat, next to Uncle Bill, I attempted CPR on her, but sadly, it was too late and she had taken her last breath.

What most of you do not know however is that the very same Jessie B. Cox that is mentioned at every turn as “family matriarch” and to whom many of us owe “the legacy” forced her incredibly talented husband, William C. Cox, top student at Milton and Harvard luminary, to retire prematurely from Dow Jones at age 40 so he could be full time in the social swirl of Cohasset. He was a star at the company! My firstborn child—Hadley—has that “C.” in her name—Coburn—to honor the talented and caring Bill Cox, Gramps to his grandchildren…

It’s four thousand words recapitulating Bancroft family wounds, missteps, slights, and betrayals, as good a piece of evidence as any that it’s time for this odd, insular, and out-of-it-family to give up the ghost.

On July 29, Michael Elefante tells the Dow Jones board that 28 percent of the family’s voting shares favor a deal. This, combined with the 36 percent of the voting shares controlled by the common shareholders—with the assumption that because the common shares are now overwhelmingly owned by arbitrageurs, they will vote for the deal—likely means that there is enough support for the deal. Murdoch, however, is looking to hedge his bet.

The News Corp. concern is that proxy solicitors have advised that while 100 percent of the common shareholders might be for the deal, News shouldn’t count on more than 80 percent of the common shareholders actually casting a vote. Still, with the support of 28 percent of the family’s votes, this should put them just over 50 percent. But this, while giving News a victory, is hardly a PR coup. Murdoch continues to suggest that he won’t do the deal unless he gets the backing of family representing 50 percent of the vote.

Beginning on the night of the twenty-ninth and running throughout the day of the thirtieth, Murdoch’s inner circle works the phones, looking to move the vote in News Corp.’s favor. One focus is Christopher Bancroft, who controls approximately 15 percent of the voting shares and who has flip-flopped on the deal (initially for, then against) for either moral or financial reasons or both and pursued his own, often grandstanding agenda. As it happens, his brother, Hugh Bancroft III, his sister, Kathryn Kavadas, and their niece, Lizzie Goth, whose trust he controls, favor the deal—but his no vote will withhold approval. After extended discussion—involving possible financial sweeteners—he agrees to abstain, meaning the trusts can approve the vote. But then it turns out that under Massachusetts law, where these trusts have been constituted, a trustee can’t abstain in such a vote. There’s a sudden rush to reconstitute these trusts in another state where this would be possible—except this would probably require an extension of the deal, which Murdoch absolutely doesn’t want to do.

Meanwhile, a discussion has been going on with the Denver Trust, with its 9 percent of the vote, and its trustee, Lynn Hendrix, who has for almost a month now been holding out for the control premium. After a series of conference calls that run through the night of the twenty-ninth, News Corp. relents, giving them the premium in the form of an agreement to pay all the legal and banking fees for the entire Bancroft family. The Denver Trust signs on to the deal, meaning family representing 37 percent of the voting shares approve—meaning the deal, albeit falling short of Murdoch’s 50 percent wish, will be approved.

On August 1 in the afternoon, Andy Steginksy, in the habit of speaking to Murdoch several times a day to talk about the deal, calls in, even though the deal is done. Murdoch’s secretary, Dot Wyndoe, patches Andy through to Murdoch, who is at home and getting into bed. Murdoch’s exhausted. He tells Steginsky he should go to bed too.

EPILOGUE
The Proprietor

 

Here’s an up-close of Murdoch as a newsman:

One morning when I arrived at his office with my research assistant, Leela de Kretser, for another interview session with the seventy-seven-year-old chairman, he was hunched over the phone reporting out a story. He’d been out the night before and gotten a tip. Now he was trying to nail it down. His side of the conversation was straight reporter stuff: Whom could he call? How could he get in touch? Will they confirm? Barked, impatient, just the facts. Here was the old man, in white shirt, singlet visible underneath, doing one of the same basic jobs he’d been doing since 1953, when he took over the
Adelaide News
in Australia from his father. And he was good at it. He was parsing each answer. Re-asking the questions. Clarifying every point. His notepad going. He knew the trade. Of how many media company CEOs could that be said? This wasn’t a destroyer of journalism, this was a practitioner.