War at the Wall Street Journal (19 page)

Elisabeth had no desire to restart the hard work she had embarked upon ten years before. Rupert Murdoch had done quite enough with his offer. She had a larger circle of allies now. What had been unformed dissatisfaction with Dow Jones's management had found a focal point in the $5 billion bid. The rich offer promised to make everyone in the three branches of her family much wealthier than they were before he came along.

Each family member had a different stake in this drama. Because the three branches had inherited equal parts in the overall fortune, some Bancrofts, five generations on, stood to get a much smaller pay
out than others. Elisabeth, for instance, was the only beneficiary of her mother's death and would benefit from the sale of Dow Jones by getting one-ninth of the entire family's fortune. Leslie Hill was one of seven children and therefore stood to inherit only one-forty-second of it. Perhaps those simple numbers explained why two of the family's strongest-willed women stood on opposing sides of the debate over Murdoch's offer.

Leslie's years as a pilot made her sympathetic to labor unions and mistrustful of what she saw as overpaid executives. Elisabeth, a champion horsewoman who had never worked a day in her life, didn't ponder such disparities. She knew that she was incredibly fortunate. Even when it came to horses, she enjoyed the buying and selling of her stallions—unlike some other owners who remained attached even after the best racing years were past. To remain in her fortunate state required some adjustments to her stock portfolio, and this was finally the moment when she might free herself of one of her most disastrous investments.

There remained one potentially large obstacle: her uncle Chris. He was the sole family trustee on the Article III trust of which she was a beneficiary. The trust owned 3.48 million super-voting shares in Dow Jones and therefore controlled 13 percent of the company's voting power. Chris Bancroft would grow weary of dealing with his cousins throughout the summer.

Two days after their meeting in Boston, the family reconvened on the phone to talk about their questions and have a "family-only" discussion away from the bankers and lawyers. On the call, Chris Bancroft, who had skipped the Boston meeting, said he was voting against the offer. He told his family he was against the deal with Murdoch, but Chris had previously sent messages through his Texas business partner to the Murdoch camp—Jimmy Lee, in particular—that gave the impression he might favor a sale. Murdoch didn't know about Chris's vote against the offer. He saw him as an important pawn in the negotiations; he thought he could sway him.

On the call, Buzzy Stevenson, married to Jean, one of the New England sisters, told his in-laws the offer was "not in the interest of the family." Leslie Hill held a different view. She said the offer needed to be explored, though she expressed her "regret, sadness, and disap
pointment" that it did. She was not saying she wanted to accept the offer, but she wanted to hear more about it.

Dow Jones's board wanted to know where the family stood. Throughout the discussion on the phone that day, it became clear that almost no one in the family was ready to vote yes to accept Murdoch's offer. Nor were they ready to reject it out of hand. If the Bancrofts weren't solidly against the bid for the company, the board wanted to start a dialogue; they had the "common" shareholders to think of. They couldn't be caught sitting on an offer this rich for shareholders unless they could put the blame for it squarely on the shoulders of their controlling family. For the Bancrofts, giving up a century of ownership would take a bit longer. In classic euphemistic style, Hemenway & Barnes came up with another way to gauge the family, one that would allow the Bancrofts to edge closer to Murdoch but maintain the appearance that they were still holding the line. Elefante asked them to say whether they were voting no or "not no."

The same day as the Bancroft family phone call, Thursday, April 26, Dow Jones chairman Peter McPherson received a fax from Murdoch, who was growing impatient with the lack of a response to his generous offer. McPherson had already responded noncommittally to his offer letter from the week before.

Since that response, Murdoch had received only radio silence from the family and the company. As the Bancrofts discussed their future on the phone, McPherson fielded another fax from Murdoch, asking the family for a meeting. He reminded McPherson that "we have a history of long stewardship of great newspapers (for instance, 'the Times,' 'The Sunday Times' and 'The Australian'). I always see my role as supporting the editors and publishers of these newspapers." He said News Corp. would be "the ideal partner to grow and expand your company, as well as protect such a vital public trust." Murdoch knew his reputation, and when he proposed a meeting with the Bancrofts, he reminded McPherson that he had family, too, as well as a group of top editors, whom it might be helpful for the Bancrofts to meet. "Such a meeting would at least give them better understanding and clear up many possible misconceptions."

The next day, Friday, April 27, Elefante knew the tally, at least so far, of those who had weighed in. Shockingly, it wasn't enough to rebuff Murdoch. Was it possible that this family, so long seen as an impenetrable fortress around the prized
Wall Street Journal,
was so easy to topple, so ready to sell out? Even Elefante, who knew all the fissures and weaknesses in his largest client, couldn't quite believe it was all moving so fast.

Elefante sent out a follow-up note to all family members informing them that given the votes counted so far, the family didn't have a majority to turn down Murdoch's proposal. That message rattled several Bancrofts, who had never seriously considered that their legacy might be taken away from them so quickly.

Two days later, on Sunday, April 29, at 10:00 a.m., Ann and Stephen Bartram, sister and brother-in-law to Billy Cox III, sent an e-mail to their relatives offering to buy out those family members who wanted to sell. They had talked to some of their cousins and aunts and uncles and signed their names to the proposal. Ann and Stephen Bartram didn't have the faintest notion of how to finance such a transaction, however, and many of the people whose names they signed on the letter were only theoretically interested in buying out their fellow family members. Still, Chris Bancroft sent an enthusiastic e-mail supporting the buyout proposal. But at 1:00 a.m., April 30, the family received another e-mail from the Bartrams, who, with the benefit of fifteen hours of reflection, retracted the offer. The Bancroft family was back to square one. Then, the morning of May 1, the Bancrofts ran out of time.

In journalism, the greatest crime is getting scooped.

David Faber, a reporter at General Electric's CNBC financial news channel, had been tipped off about Murdoch's offer. Faber e-mailed Gary Ginsberg at News Corp. the morning of May 1, 2007: "I know."

Ginsberg called Murdoch's office to tell him that they were about to be outed; things were about to change. The night before, Murdoch and his executives had met with their bankers. The stocks of both News Corporation and Dow Jones were acting up, and they had been bracing for the news to break. Murdoch, aware of McPherson's veiled threat in his last note to keep the news confidential, immediately sent him a fax:

Dear Mr. McPherson:

We have just been approached by email by a reporter from CNBC who claims to know something of our talks. We have not spoken to him. However, if you don't already know it I thought I should warn you.

In the event that something is broadcast, we should consider whether both of us say nothing or try to put together a bland joint statement. The danger is that so many bankers, lawyers and directors are now "in the know" something may be said which would not be in the interests of either side.

Sincerely,

Rupert Murdoch

But before he could hit the Send button, Faber's report was scrolling across the bottom of the screen (Murdoch had to turn from his Fox News channel to CNBC to get the story), so he quickly added a postscript:

As I sign this it is now on CNBC with the correct price!

When CNBC reported that News Corporation had made an unsolicited $60-a-share offer for Dow Jones & Company, the newsroom of the
Wall Street Journal
issued a collective shudder, not just because the unthinkable had happened—Rupert Murdoch had made a bid for the paper—but that the information was coming from a rival news outlet.

When CNBC broke the news shortly after 11:00 a.m., the
Journal
's editors put media editor Martin Peers's story—in the works ever since
Journal
managing editor Paul Steiger received his e-mail from Murdoch nearly two weeks before—on Dow Jones Newswires.

As happened at many points during the summer, Mike Elefante was caught off guard by the breaking news. Although Elefante had spent the past two weeks polling the Bancroft family on how they felt about the offer, the family was so disorganized, and Elefante's communication with them was so strained, that even now, after the news that would change all their lives had broken, he was still uncertain about their stance as a group.

If the family turned down the offer immediately, the company's board would do the same, arguing that its hands were tied by its controlling shareholder. The family's super-voting stock, with ten times the voting power of a regular common share, had long gone out of fashion in corporate America. Such dual-class structures hung on in the newspaper industry as a vestige of a time when the press occupied a more respected rung on the societal ladder and family values trumped shareholder activism.

By 2007, that view was not only unpopular; it was mocked. Shareholders were demanding not great journalism but great financial returns. Newspaper company executives shared in the notion. Focusing on profits made the companies stronger, the argument went, and strong companies produced more and better journalism. The directors subscribed to a more extreme version of this idea: that Dow Jones existed to make money for its shareholders. They believed they were legally obligated to ensure that the company do so.

If the family was on the fence or in favor of the offer, then Dow Jones's board felt an obligation to carry out its "fiduciary duty" to the shareholders of the company who had entrusted them with their hard-earned dollars. Those shareholders weren't concerned about the Bancrofts' emotional attachment to the company, and they weren't about to subsidize it. As soon as the "common" shareholders found out that Murdoch had made such a dizzying offer for Dow Jones, the weight of all of Murdoch's $5 billion would fall on the Bancroft family.

Elefante couldn't corral the Bancrofts; he was still trying to tally the family's stance that morning when the news broke.

Zannino called him. "Mike, I need to know where the family stands," he said, desperate to know how he was going to handle this situation if they turned the offer down, incredulous that they might. "I'm going to need a bit more time," Elefante responded. "We're trying to get in touch with a few people and be as thorough as we can." The events were overtaking both men. After CNBC reported the news of Murdoch's offer, the New York Stock Exchange briefly halted trading in Dow Jones's stock, pending a press release from the company. The halt lasted less than ten minutes, and the release gave little in
formation. "Dow Jones & Company today confirmed that its Board of Directors has received an unsolicited proposal from News Corporation to acquire all of the outstanding shares of Dow Jones common stock and Class B common stock for $60.00 per share in cash, or in a combination of cash and News Corporation securities," the release read. "The Board of Directors and members and trustees of the Bancroft family, who hold shares representing a majority of the Company's voting power, are evaluating the proposal. There can be no assurance that this evaluation will lead to any transaction."

After Zannino spent several hours sweating in his office while Elefante frantically called Bancrofts, Elefante was finally able to confirm that enough members of the family were against the offer that he could say no to Murdoch. "A substantial portion" of the family was against the deal, he told Zannino. But Elefante wasn't specific enough for Dow Jones's outside counsel, Fried, Frank's Art Fleischer. If the board was going to make all the rest of its shareholders forgo Murdoch's billions, the Bancrofts were going to have to be a bit more specific about how many of them were against the deal. The board was in, as one director inelegantly put it, "ass-covering mode."

Elefante spent several more hours tallying the total and came back with a stunning clarification: Bancroft family members representing "slightly more than 50 percent" of the company's overall voting power were against the deal. The slim margin showed that it would take only a nudge for the Bancrofts to sell the company.

By the end of the day, Dow Jones's shares had increased from $36, roughly where they had been trading for the past several years, to $56, a 55 percent increase. In that single day, more people traded the stock than in any day in the past thirty years, and more than two-thirds of the shares changed hands. The company, in effect, had been sold—not, for the moment, to Rupert Murdoch, but to a new breed of investors. These investors—hedge fund managers and arbitrageurs—were not Dow Jones's sleepy circle of shareholders. They were investors who looked for significant "events" to drive a stock price. Hanging on to shares for the long term wasn't part of their plan. They were betting Murdoch's offer would succeed, and they would do everything they could to make sure they were right. Zannino and every other member of the board felt that this shift would make Dow Jones "ungovernable" if the sale fell through. Shareholder lawsuits would be plentiful. Directors would resign. The new shareholders would lobby to nominate their own directors, who would put the company up for sale. "It's going to be nigh impossible to put this genie back in the bottle," Zannino thought.