Reports: Murdoch, Bancrofts Close to a Deal

Well, The New York Times comes a day later than Matthew Drudge predicted–and arguably a dollar shorter–with its front-page investigative piece on Rupert Murdoch and News Corp.

He lobbies! He uses The New York Post to advance his agenda! He courts powerful people on both sides, especially since Ted Kennedy once made him cry and have to sell The New York Post!

But it's certainly worth reading as a primer on the workings of Rupert Murdoch's influence over his own business environment.

The more urgent piece, coming from Siklos, Sorkin and Perez-Pena, who have been leading the newspaper's coverage of the Murdoch bid, asserts that the Bancrofts and the Murdoch's are close to finalizing a deal that is meant to guarantee editorial independence to Dow Jones publications if a deal to buy the company went through. The arrangement is a prerequisite for a sale by the Bancrofts, and though both sides cautioned that it was not yet clear whether the sides could come to terms on other features of a deal, the editorial independence framework has been regarded as the crucial piece for some weeks now:

If an agreement on newsroom independence were to be made by the Dow Jones board, the News Corporation and the Bancroft family, the only barrier standing in the way of Mr. Murdoch’s control of The Wall Street Journal would be the selling price.

It looks as though the Bancrofts are the ones losing ground on this:

Over the weekend, Mr. Murdoch responded to a proposal of editorial assurances the Bancrofts sent him on Friday, which his advisers described as wholly unacceptable and virtually identical to what the Bancrofts had proposed three weeks ago. Mr. Murdoch’s counterproposal closely mirrored Mr. Murdoch’s initial proposal, said one person with knowledge of the offer who was not authorized to speak publicly.

The Wall Street Journal this morning reports that disagreement over the deal had emotions running high this weekend.

After a couple of weeks of relative inactivity, takeover talks heated up over the weekend and were moving quickly. The talks were characterized as constructive, but not before generating high emotions and brinksmanship on both sides. News Corp., which is offering $5 billion for Dow Jones, threatened to back out of the negotiations and told Dow Jones at one point it was about to send a letter pulling out.

To respond to Dow Jones's editorial-independence proposal, News Corp. sent back a significantly altered draft yesterday morning, according to a person familiar with the matter. News Corp.'s proposal cut out portions of the board's initial proposal and reduced the Bancroft family's involvement in the structure designed to safeguard the editorial independence of Dow Jones, this person said.

According to the Journal article, editorial is weighing in heavily.

Marcus W. Brauchli, the Journal's recently appointed managing editor, and Paul Gigot, editor of its editorial page, have been advising the family on editorial principles and have taken on a more central role over the weekend, according to a person familiar with the matter.

That resulted in a proposal that on Friday had Mr. Murdoch steaming.

After receiving the proposal from Dow Jones's board Friday, News Corp.'s Mr. Murdoch called Dow Jones's CEO, Richard F. Zannino, and Bancroft family legal adviser Martin Lipton to express his anger and disappointment with the proposal, according to people familiar with the matter.

Mr. Murdoch was incensed by the contents of the proposal, which he found "insulting," according to a person close to him. His advisers drafted a two-page withdrawal of his $60-a-share offer for Dow Jones over the weekend. But before it was sent, a top News Corp. executive called a Dow Jones board adviser, and they agreed that the two sides could negotiate, say people close to News Corp.

Features of the independence deal currently under discussion are:

  • 16-member board of directors at Dow Jones, maintained by News Corp.
  • Five of those 16 directors selected jointly by News Corporation and the Bancrofts to form 'editorial independence' committee
  • Committee oversees hiring of managing editor and editorial page editor
  • Managing editor to approve any deal to use the Journal brand with any business not owned by News Corporation
  • Oversight of Dow Jones brands, budgets and the appointment of publisher out of the committee's purview
  • One seat on News Corporation board to a Bancroft family member of News Corp's choosing-not two, chosen by the Bancrofts, as the family had previously proposed