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The Board of Directors at Dow Jones, which includes four Bancroft family representatives, is managing Rupert Murdoch's bid for the company.
Shareholders of Dow Jones deserve to receive some premium from holding the failing stock's shares for so long.
Due to the excessive speculative stock buying in the newspaper industry as a whole, I finally conceded and sold New York Times stock for 9% gains in Diligent Investor.

Buyout Targets: The Continuation of the Dow Jones Saga

Now we're seeing some favoritism seep into the bidding wars for the Dow Jones Company (DJ:NYSE).

To make the bidding process a bit more… should I say, clear… especially when it comes to the Bancroft family's insistence on making business deals extremely personal considering their hold on the company in a dual-class share structure, the board of directors at DJ is taking over the management of the bidding proposal with Rupert Murdoch and News Corp. (NWS:NYSE).

As we know, Murdoch has offered $60 per share, or $5 billion, for Dow Jones, a bid he placed in August. As a side note, Brad Greenspan (everyone's “friend” on MySpace.com because he created and then sold the site to Murdoch and News Corp) is trying to get his hands on a non-controlling stake of DJ also at $60 per share through a dutch-auction process.

The Bancroft family had mentioned earlier in the week that it was working on a proposal as a response to Murdoch concerning his offer, which deals with “protecting the newspaper's editorial independence.” This came on the heels of a rumored bid by General Electric (GE:NYSE) and Pearson PLC (PSO:NYSE), which owns the Financial Times. The joint partnership between the two companies had already offered a minority stake in the company for the Bancroft family, so it can maintain “editorial integrity.” But GE confirmed this afternoon that it has abandoned the joint bid.

Buyout Targets: Dow Jones Seem Keener on Murdoch's Bid

By putting the board of directors in charge of Murdoch's bid, it shows that the company is keen on taking his bid above all others, not to mention that they are serious about selling the company. Of course, after the whole process, it'll still have the option to stay independent, just like Tribune entertained consistently through its bid process.

There are four representatives on the board of directors for Dow Jones, composed of a total of 16 members. These include Christopher Bancroft, owner of Bancroft Operations, a private investment firm; Leslie Hill, a retired airline captain for American Airlines; and Michael Elefante, a lawyer for the family.

It was Leslie Hill who began to coerce his family members that they should meet with Murdoch, after they refused for weeks to even respond to his bid offer and letter.

A lot of the turmoil surrounding the bid and the possible selloff of Dow Jones most likely concerns the dividends that the family has lived on for decades.

For the past five years, dividends paid to both the Bancroft family and shareholders have beaten earnings gains for the company, considering its position in a currently fledgling newspaper publishing industry. Consider Jacqueline Spencer Morgan who married Hugh Bancroft in 1948, and passed away in 2003: she was making $4 million a year for her trust on dividend payments from Dow Jones alone!

Buyout Targets: Dow Jones Acquisition News Turned NYT into a Speculative Stock

As I've said before, this is most likely the second in a long line of dual-class structure newspaper companies that have finally realized they've had their heyday and must now act endearing toward shareholders. If the companies aren't going to turn a profit, as Tribune didn't before it was sold to Sam Zell, then shareholders should at least receive some premium price for the stock they've held for years.

While news of Murdoch first bidding for DJ pumped up every other stock in the newspaper industry, speculators have forfeited their quick profits.

In terms of The New York Times (NYT:NYSE), which profited exceptionally from DJ bid announcements, as it is purported to be the next newspaper empire to fall to the current M&A trend, it is now reversing in price and most likely will return to $24 per share.

I really loved this stock a lot, and if it weren't for the disarray in the industry now, among mostly dual-class share newspaper giants, I would have held on to it. But now that it's shown to be a “speculator stock” at its current juncture, and is raising the price of its New York Times newspaper to compete with still-failing advertising revenue and circulation, I had to put it to bed in the Diligent Investor portfolio for 9% gains.

I look forward to the day when perhaps I can recommend it again.

***

Ann Sosnowski is a small and mid-cap stock analyst for Taipan Financial News. She is the editor of Diligent Investor, a monthly newsletter that balances conservative and moderately risky investments that pertain to current market trends. She is also the editor of Diligent Investor Micro-Cap Hot Sheet, a monthly newsletter that finds the hottest penny and micro-cap stocks on the market.

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