Abstract:
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This case is about one of the biggest media companies in the
world News Corporation's (News Corp.) acquisition of Dow Jones & Co., Inc. (Dow
Jones), the owner of the prestigious business newspaper, The Wall Street Journal
(WSJ).
The case revolves around how News Corp. managed to convince the Bancroft family,
which owned controlling stake in Dow Jones, and acquired the firm. It also
discusses the criticism against the deal. News Corp. wanted to acquire Dow Jones
in order to expand in the financial news sector and to compete with some other
newspaper majors like The New York Times and the Financial Times.
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Initially, News Corporation faced severe opposition from both
the Bancroft family and the media critics. Critics argued that the editorial
integrity of WSJ would be severely compromised under News Corp. in view of the
prevailing perception that News Corp. used its publications for promoting its
own interests, and that the group's Chairman and CEO Rupert Murdoch interfered
in editorial matters.
News Corp. allayed these fears and finally convinced the Bancroft family to go
ahead with the deal. It assured the family that the editorial integrity of WSJ
would be maintained and promised to constitute an independent editorial
committee to safeguard the editorial independence of WSJ. However, not all
stakeholders were convinced that WSJ would be able to maintain its editorial
integrity post-merger. Finally, News Corp. acquired Dow Jones for a whopping
US$5.6 billion.
Experts said that the US$60 a share offered by News Corp. was very attractive
from the valuation perspective and had helped overcome the resistance of the
Bancroft family, particularly at a time when the newspaper industry was going
through a tough phase. Some experts also said that News Corp. paid an exorbitant
price. They said WSJ, the control over which was believed to be the primary
reason for the high price paid by News Corp., was only marginally profitable.
But others saw it as a positive move by News Corp. and said that it was unlikely
that Murdoch would do anything that would hurt WSJ in any way considering the
high price he had paid to gain its control. They felt that the company offered a
price that was just about right for the Bancroft family to look beyond the
internal politics and other considerations and go ahead with the deal. Moreover,
they felt that when looked at from a global context, the Dow Jones acquisition
held a lot of promise for News Corp.
Issues:
» Understand and appreciate the role of mergers and acquisitions (M&A) as a
growth strategy.
» Critically examine the rationale behind the acquisition of Dow Jones by News
Corp.
» Gain an in-depth knowledge about various corporate valuation techniques.
» Understand other non-financial considerations in M&A.
» Get insights into the trends in the global newspaper industry.
» Understand the ethical issues related to News Corp.'s acquisition of Dow
Jones.
Contents:
Keywords:
Growth strategy, Competition, Industry analysis, Merger and acquisition, Corporate valuation, Newspaper, Publishing, Wall Street Journal, Dow Jones, News Corp, Family-owned
News Corporation's Acquisition of Dow Jones
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