Little Ship of Bitterness Sidles Up To H.M.S. Murdoch

On Tuesday afternoon, Steve Yount, president of Local 1096, the union that represents Dow Jones employees, dined at the Waldorf in midtown Manhattan 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 Mr. Greenspan shared his ideas for better adapting Dow Jones to the digital age.

It was the first time the two had met in person after several conversations by phone. For the past two-and-a-half months, Mr. Yount had been publicly opposing Rupert Murdoch’s bid to buy Dow Jones, and privately yearning for other potential suitors. On Tuesday afternoon, he sized up the young entrepreneur sitting across from him, and he liked what he saw.

Mr. Greenspan, who is dark-haired and handsome, helped found MySpace back in 2003. Roughly two years later, Mr. Murdoch’s News Corp. sought to purchase the social networking site. Mr. Greenspan opposed the deal, which went through anyway. Afterwards, he filed a civil lawsuit alleging financial shenanigans. The lawsuit failed.

Victory: Murdoch.

On June 20 of this year, however, Mr. Greenspan popped back into Mr. Murdoch’s orbit, apparently spoiling for a second round. With Mr. Murdoch’s $5 billion bid for Dow Jones still teetering in Bancroft purgatory, Mr. Greenspan announced that he and a group of unnamed investors were interested in buying a 25 percent stake in company that Mr. Murdoch had so coveted for so long.

All of which, Mr. Yount had followed closely.

Only three weeks earlier, Mr. Greenspan’s bid had weighed in at roughly $1.25 billion—a somewhat middling amount compared to Mr. Murdoch’s $5 billion. But during the intervening weeks, Mr. Greenspan had apparently shifted strategy. Somewhere along the line, he had picked up a new ally. By name: Ronald Burkle. By reputation: The 117th richest man in America.

For the moment, life at the Waldorf was looking up for Mr. Yount and, for that matter, for myriad media pundits, thwarted ex News Corp employees, and skittish Bancrofts who felt apprehensive about Mr. Murdoch’s ambitions for Dow Jones.

Mr. Yount knew that in a few hours, Mr. Greenspan would be joining Mr. Burkle for a late afternoon meeting with a delegation from Dow Jones to gauge the Bancrofts interest in potentially selling them a part of the company. If everything went well, Mr. Yount’s plan to fend off Mr. Murdoch would be in full swing by day’s end.

It was a plan that Mr. Yount had first set in motion back in early June when he announced that the Local 1096 would be retaining the services of Ownership Associates. The group, which is based in Cambridge, Massachusetts, specializes in an esoteric form of financial jujitsu known as 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 out-maneuvered another potential suitor–Ronald Burkle, the 117th richest man in America.

Not long after Mr. Yount’s union put Ownership Associates on retainer, Mr. Burkle began publicly communicating his potential interest in Dow Jones. Fast forward a few weeks, and now not only were Mr. Greenspan and Mr. Burkle joining forces, but they were also now considering the very financial strategy which Mr. Yount favored.

“If the family doesn’t want to sell to Mr. Murdoch,” said Mr. Yount several hours after lunch. “This opens up a whole range of possibilities.”

Just how possible? Could the tag-team investors actually take Dow Jones private through an ESOP deal similar to the Tribune Company’s?

Reached by phone on Tuesday afternoon, longtime newspaper analyst John Morton said he was skeptical that anyone could pull off an ESOP 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. “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 sizeable 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 and Mr. Greenspan or anyone else wanted to put together an ESOP bid, in theory, they 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.”

Reached by phone at around 8 pm on Tuesday night, Mr. Yount sounded downright jubilant. For the time being, Mr. Greenspan and Mr. Burkle have yet to give the Bancrofts a specific offer. But for the first time in a long time the dawn of a Murdoch Journal seemed a touch less inevitable.

“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.”

Little Ship of Bitterness Sidles Up To H.M.S. Murdoch