The Man Who Owns the News (24 page)

Everybody confers with Ginsberg about what the old man is thinking—not least of all because the old man doesn’t necessarily ever say what he’s thinking, or say what he’s thinking to any one person in any consistent way—and if he does, he mumbles so much, and his accent is so thick, that you might not understand him anyway. Everybody tends to have just their piece of the story—Ginsberg pieces together the pieces.

Dave Faber’s scoop about Murdoch’s offer of $60 a share for Dow Jones, Ginsberg understands, will change the story.

Ginsberg’s preparedness—or rough-and-readiness, or media savviness, or sense of reality and its plasticity—is at dramatic odds with what anybody at Dow Jones can offer. Nobody there seems to quite get their heads around the situation they’ll face if Murdoch’s offer goes public before they decide what to do about it.

The Dow Jones board has, in essence, handed over the next step—and the leadership of the process—not to mergers and acquisitions specialists (ideally ones with a good media sense) but to a sleepy Boston law firm. To, specifically, Michael Elefante of Hemenway and Barnes, where they are more used to the vagaries of doddering families than to the sharks of finance and media. Trying to wash their hands of the matter, the board said to Elefante—who represents the controlling shareholders and who, as the trustee, holds the controlling vote, practically speaking—
You have to tell us what the family wants to do.
Elefante was asked to begin canvassing the family shortly after Rich Zannino’s breakfast with Murdoch on March 29, and while he began consulting with advisors and the family board members, he didn’t tell the entire family for three weeks.

Instead of telling the family there had been a $60 offer, they were asked to consider what they might do in the event of a hypothetical offer with an unspecific price.

Finally, on April 20, Elefante and the rest of the family trustees at Hemenway and Barnes commenced a series of exasperating phone calls with each of the family members. Elefante was unable to communicate adequately to the family—perhaps because he didn’t quite understand—that there were two issues, each as relevant as the other. Whether they wanted to sell (and for how much) was one issue. The other was that if they didn’t make their feelings known before the offer became public, then they’d have to share the whole tedious decision-making process with the marketplace.

Elefante finally convened a family-wide meeting on April 24 at the Hemenway and Barnes offices on State Street in Boston. Almost all the adult Bancrofts, plus banking advisors from Merrill Lynch and lawyers from Wachtell, Lipton, were either in the room or waiting to be connected by conference call. Except the phones didn’t work. And then a fight broke out between an ailing seventy-six-year-old Bill Cox Jr., whose son led the 1997 rebellion, and who would only see the
Journal
sold over his dead body—he repeatedly banged his cane on the floor for emphasis—and his nephew, the obstreperous Crawford Hill, who very much wanted the money. Still, mostly the family was at least against being forced to make up its mind, and certainly against Murdoch, though not necessarily against $60.

The family’s race against the clock—to declare its desire before the bid was leaked and the market is able to declare
its
desire—was hampered by their inability to appreciate several overriding business factors:

While the family controls the voting shares, in a public company such control is not absolute. As soon as the bid goes public, other constituencies will have a powerful say, potentially in the form of shareholder suits.

The family believes that if it
does
want to sell, it can pick the buyer—who would never, ever be Murdoch—which necessitates there being other bidders.

Murdoch’s $60 bid is preemptive; he is offering a substantial premium for the privilege of trumping everybody. If the offer goes public and no bidders emerge, the family will lose the leverage to negotiate a higher price with Murdoch.

Not understanding these factors, the Bancrofts also did not appreciate that the circumstance is a perfect bit of business triangulation. Either (a) they turned down Murdoch flat—and had better do it quickly—or (b) they negotiated with him, which, since Murdoch didn’t yet know there won’t be other bidders, might mean the family could get more than $60 a share.

What they chose—angst and ambivalence—isn’t a tenable option. The public outing was imminent and inevitable.

In the days since the offer letter was received from Murdoch, the company’s executives, board, and family of controlling shareholders had begun, after a period of deer-in-the-headlights paralysis, to do what was necessary—necessary, at least, to avoid shareholder lawsuits: assemble the apparatus of bankers and lawyers.

Zannino pushed aside longtime Dow Jones advisor Roger Altman, the former deputy treasury secretary in the Clinton administration, who now runs the investment firm Evercore Partners. Altman is close to Peter Kann and well grounded in the company’s historic bias against selling. Zannino instead had hired Goldman Sachs, which usually represents Murdoch. The family itself hired Merrill Lynch. Dick Beattie, one of the most iconic takeover lawyers of the age of takeovers—and, as it happened, one of Gary Ginsberg’s mentors when Ginsberg was an associate at Beattie’s firm, Simpson, Thacher—was retained by the special committee of the board. Marty Lipton,
the
most iconic takeover lawyer of the age of takeovers, was hired by the Bancroft family (Lipton was already advising Elefante about how the family could sell down its holdings but still retain control). Art Fleischer, of Fried, Frank, Harris, Shriver, and Jacobson, is also involved as Dow Jones’ outside counsel.

On the News Corp. side, assembling quickly, you have News Corp.’s longtime bankers at Allen and Company (who are in the mix partly for sentimental reasons and partly because Nancy Peretsman, an Allen partner, counseled the two dissident Bancroft family members in 1997); a buddy of Ginsberg’s, Blair Effron at Centerview Partners; Andrew Steginsky; and Jimmy Lee, along with his people at JPMorgan Chase, who will become everyone’s favorite as the leaker.

At any rate, one of the more than one hundred people who knew about Murdoch’s $60 offer alerted Faber (he says it was a source at an investment bank) to “not the biggest deal, but a jaw-dropping one.”

But since the leak has become the
deus ex machina
of the deal, it is likely that it was less than random—part of the movement of forces against what will turn out to be the Maginot Line protecting one of America’s most prestigious and historic franchises.

Along with Murdoch’s superhuman sense of the long term, there is his indifference to the weight of the obvious: There isn’t anyone who believed that Dow Jones was vulnerable, except Murdoch—which is where the leak comes in.

Serious businessmen don’t brag about the deals they’ve lost; serious businessmen don’t pursue deals that can’t be done. And they don’t go up against the implacable resistance of the voting tier of a two-tier stock company (Murdoch’s own company was organized this way). Except if they can show that the resistance is not implacable.

CNBC’s Faber is an ideal target for the leak. He works for a 24/7 business news channel and can go on the air immediately. Faber’s audience is every trader on Wall Street. From his mouth to their next trade. On his report, the stock, trading at $36, can rise close to Murdoch’s offer of $60.

The more the traders bet on Murdoch—the closer the share price gets to $60—the harder it will be for the company not to do the deal. It’s like a run on the bank, but in reverse. Every shareholder and option holder in the company is being promised a windfall. Would the Bancroft family and Dow Jones management have the mettle and the meanness and the confidence to take it away from them—and themselves?

An ironic element here—an aspect of the strange and incestuous relationship of the press, which Murdoch intimately understands and which often underlines his PR game—is that, after Dow Jones itself, this news could be most detrimental to CNBC.

For more than three years now, Murdoch—who twenty years ago launched a fourth television network, and eleven years ago launched a 24/7 cable news network—has been planning to launch a business news network whose goal would be to devastate CNBC. Competing with Murdoch is difficult enough, but it could be a whole breathtakingly new level of competition if Murdoch owns the
Wall Street Journal.

Murdoch seems to understand perhaps better than anyone else that the established media can often be counted on
not
to work in its best interests. (If it were his network, Fox News, that obtained information that put its business interests at issue, you can bet it would act quite differently.)

This will become a major charge against Murdoch during the takeover battle, that he uses his media outlets for his own interests.

Meanwhile, CNBC and its parent NBC have not used the information they possess—have not leaked the leak, which would give Dow Jones the opportunity to shoot down the offer—to undermine the deal that could lead to its own undermining.

This is not the only point of media irony. The
Wall Street Journal
, that great organ of business media, and the one with the most at stake, has the story too. They have been sitting on it for two weeks. Murdoch himself, in mid-April, had communicated with the
Journal
’s editor, Paul Steiger, about the offer. Steiger, the world’s most important business editor, had the world’s most important business story, and decided—thereby keeping the $60 offer in play—not to use it. Had the
Journal
revealed the offer and the company’s rejection of it—even just its usual pro forma rejection—the deal might have been quashed.

When Ginsberg reads the e-mail from Faber, he feels a certain dizziness. And he has the sense that the other side must have its head up its ass—that they have lost control of the process.

THE EIGHTIES

The modern, million-plus-circulation
Wall Street Journal
was created by Barney Kilgore, the most famous newspaper editor nobody has ever heard of. (What’s called Dow Jones’ Princeton campus—but which is really in South Brunswick, New Jersey, and whose usefulness Murdoch will regularly question during the takeover battle in 2007—is named the Bernard Kilgore Center, and features a statue of Kilgore with his sleeves rolled up.) Despite his success, Kilgore is unheralded for three reasons: He edited a specialized business paper, he was a conservative in the liberal age, and he was a modest guy—indeed, that modesty, or reticence, or ambivalence toward whatever is popular still informs the
Journal.

He’s been dead and all but forgotten for forty years by the time Murdoch is trying to buy the paper. (His contemporaries in stature, Henry Luce at
Time
and Harold Ross at the
New Yorker
, have yet to fade into comparable obscurity.) But Murdoch knows Kilgore. Because of his conservatism or because of his success—or both—he’s Murdoch’s idea of a great editor and great man. To Murdoch, the
Journal
has mostly gone downhill since Kilgore. Richard Tofel, an executive at the
Wall Street Journal
from 1989 to 2004, will begin his book about Kilgore with Murdoch’s views, taking his title—
Restless Genius: Barney Kilgore and the Invention of Modern Journalism
—from Murdoch’s estimation that Kilgore founded journalism as we know it.

Some of Kilgore’s innovations surely suit Murdoch. In Tofel’s description of Kilgore’s editorial strategies, “stories needed to be shorter; fewer needed to ‘jump’ from one page to another.” Kilgore, in the
Journal
’s “What’s News” column—still the most widely read part of the paper—invented news summarization. Kilgore’s no-nonsense packaging of news and facts is Murdoch’s idea of a quality paper. It’s a Murdoch fixation: Almost all newspaper stories are too long, including the
Wall Street Journal
’s. (Some of Kilgore’s other innovations, however, notably the “A-Hed,” the
Journal
’s signature quirky front-page story, puzzle and irritate Murdoch. The idea of the anecdotal lead, which defined Kilgore’s idea of “sprightly” writing, is a dubious indulgence in Murdoch’s eyes.)

But what Murdoch will eventually buy is not Kilgore’s
Journal
. Kilgore is as relevant to that modern
Journal
as Murdoch himself is relevant to, say, the anonymous titans of industrial production. Murdoch and the
Wall Street Journal
are, ultimately, creatures of the 1980s. Each is transformed by the decade; each helps create the decade. As money achieves a different value, a different meaning, during this period, so did Murdoch and so did the
Journal.

The
Wall Street Journal
that existed before the 1980s existed as business did: as a discrete entity, as a specific and relegated function. The pre-1980s
Wall Street Journal
covered a set of industrial-related functions. It was a business paper speaking to exceedingly narrow-bore businesspeople. Its readership consisted of investors, executives, and retired investors and executives. Its readership reached 1.775 million in 1979, making it the largest paper in the United States and reflecting the creeping expansion of business that will shortly change modern life. But that change had yet to happen. “To the people who edit the nation’s daily newspapers, the
Wall Street Journal
has always been a kind of stepbrother. A member of the family, yes, but without much family resemblance…and is certainly not a paper of general appeal,” noted the
New York Times
when the
Journal
surpassed the
Daily News
to become the nation’s largest-circulation daily paper. This had as much to do with the nature of business as with the emphasis on earnings reports in the paper: Business had yet to spill over into everyday life. Business hadn’t yet become a key part of the culture. Business hadn’t yet become a dramatic event—a
news
event. Business didn’t yet involve so much money.