News Corporation's Acquisition of Dow Jones

            
 
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Case Details:

Price:

Case Code : BSTR301 For delivery in electronic format: Rs. 400;
For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

Growth Strategy/ Merger & Acquisitions/ Strategic Finance/ corporate valuation
Case Length : 20 Pages
Period : 2007-2008
Pub Date : 2009
Teaching Note : Available
Organization : News Corporation; Dow Jones
Industry : Media & Newspaper Publishing
Countries : Global; USA

Abstract:

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:

  Page No.
Introduction 1
Background Note 2
The Proposal 5
The Deal 6
The Aftermath of the Deal 8
Looking Ahead 9
Exhibits 11

Keywords:

Growth strategy, Competition, Industry analysis, Merger and acquisition, Corporate valuation, Newspaper, Publishing, Wall Street Journal, Dow Jones, News Corp, Family-owned

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