Burkle and Greenspan Gather Journal Kiddies for ESOP Fable

On Tuesday afternoon, Steve Yount, president of Local 1096 of the Independent Association of Publishers’ Employees (the union that represents Dow Jones employees), had lunch at the Waldorf in midtown with Brad Greenspan, the founder of MySpace.

Over lunch, they talked about Mr. Greenspan’s potential interest in buying Dow Jones. The meeting lasted several hours. Along the way, Mr. Yount offered his advice on how to approach the members of the Bancroft family. And he listed to Mr. Greenspan’s ideas for better adapting Dow Jones to the Internet age.

It was the first time they had met in person after several conversations by phone. Mr. Yount, who has opposed Mr. Murdoch’s bid to buy Dow Jones, walked away from the Waldorf feeling impressed.

“If the family doesn’t want to sell to Mr. Murdoch,” said Mr. Yount afterwards, “this opens up a whole range of possibilities.”

He was apparently not alone.

Afterward, Mr. Greenspan joined supermarket billionaire Ronald Burkle for a meeting with a committee of Dow Jones representatives—including several board members, and a Bancroft family representative.

“The report I got is that it was a good meeting,” said Mr. Yount. “Everyone saw that there is a serious alternative to selling to Murdoch.”

In early June, Mr. Yount announced that the union was retaining Ownership Associates—a private financial group that advises employees who are considering options for collectively purchasing the companies they work for.

The group, which is based in Cambridge, Mass., specializes in so-called ESOPs (employee stock ownership plans). Only a few months earlier, Sam Zell had used an ESOP bid to purchase the Tribune Company. Along the way, he outmaneuvered another potential suitor. One Ron Burkle.

Could Mr. Burkle use the same game plan to buy Dow Jones?

Reached by phone on Tuesday afternoon, longtime newspaper analyst John Morton said he was skeptical that anyone could pull off such an arrangement to buy Dow Jones. Mr. Morton pointed out that ESOPs require buyers to borrow a large amount of money up front—money which is eventually paid back over time by the companies’ employees.

The problem, according to Mr. Morton, is that given the dour financial prospects of the newspaper industry, it might be difficult to convince anyone to put up enough money to compete with Mr. Murdoch’s bid of $60 a share.

“The company’s financial performance would have to cover any borrowing, both principal and interest, eventually,” said Mr. Morton. “I think there would be a lot of concern on the part of lenders whether Dow Jones would be able to do that.”

Mr. Morton didn’t rule out the possibility that the Bancroft family might consider an ESOP bid at a lower price because of their concerns about selling to Mr. Murdoch.

“Apparently there are a number of family members who find Mr. Murdoch’s journalism repugnant and are fearful of what he would do, particularly to The Wall Street Journal once he got his hands on it,” said Mr. Morton. “I think there’s an awfully lot of apprehension in the family, and it wouldn’t surprise me if they might be willing to take a bid at lower than $60. But it couldn’t be that much lower. Clearly there’s also a sizable contingent in the family that wants to get paid.”

Mark Edmiston, of Ad Media Partners, a financial advisory firm that specializes in part in media transactions, was more optimistic. He said that if Mr. Burkle or someone else wanted to put together an ESOP bid, in theory, he should be able to find a lender.

“Debt is pretty available,” said Mr. Edmiston. “the Wall Street Journal brand is terrific. I’m not totally familiar with their cash flow. That determines what you’re able to do. But is it possible? Absolutely, it’s possible. It might be hard to get to Murdoch’s price. On the other hand, then the employees would own the company, so they wouldn’t have to worry about negotiating the structure of committees to oversee editorial integrity and all these other things.”

What does Mr. Yount think about Mr. Burkle’s prospects?

Reached on Tuesday afternoon, he said that the union had no immediate plans to put out a response to Mr. Burkle’s meeting with Dow Jones reps.

“I think it’s clear the family does not want to sell to Rupert Murdoch,” said Mr. Yount. “If they did, they would have taken the $5 billion a long time ago. We would much rather have the family continue its stewardship of this company. I believe that working with Burkle and a number of other people, we have alternatives, if the family wants an alternative.”

Burkle and Greenspan Gather Journal Kiddies for ESOP Fable