As Murdoch prevails, news industry waits for fallout

Rupert Murdoch's tenacious three-month battle for the company that owns The Wall Street Journal is over. But the industry changes propelling Murdoch's successful bid, and the ripples it has sent through the increasingly jittery news business, are just beginning.

Dow Jones & Co.'s board last night signed off on an agreement to be acquired by Murdoch's News Corp. for about $5 billion. The approval came after dozens of members of the bitterly divided Bancroft clan, a family with Boston roots that has controlled Dow Jones & Co. for more than a century, commited the bulk of their shares to the buyout offer.

With the anticipated support of most nonfamily shareowners, and the backing of the Dow Jones board, the Bancroft votes canvassed over the past four days were sufficient to cement the purchase.

That sets the stage for Dow Jones, which also owns a wire service, the MarketWatch website, Barron's magazine, and the Ottaway chain of 27 local newspapers and magazines, to be rolled into the global News Corp. media and entertainment empire that includes the Fox News television network, the 20th Century Fox movie studio, the MySpace social networking site, the Times of London, and racy tabloids on three continents. News Corp.'s board also approved the deal last night.

The most coveted prize is the Journal, often considered the world's top business publication, which has won 33 Pulitzer Prizes since 1947. Its daily circulation of 1.7 million -- the nation's second-largest after USA Today -- reaches an elite readership of executives, managers, and investors.

In the end, it was a side deal that sealed the takeover: News Corp. agreed to pay advisory fees for Bancroft family members, who had retained a nationwide army of lawyers and financial consultants led by the Hemenway & Barnes law firm in Boston. Those fees could total $30 million, according to a Journal report.

Murdoch overcame opponents in the Bancroft camp and preempted rival offers with a bid that represented a 67 percent premium over Dow Jones' share price. And on Monday, in an apparent move to strong-arm wavering family members, Murdoch's spokesman sent Dow Jones shares tumbling 5.3 percent with a statement casting doubt on whether the buyout would go forward.

Yesterday, as it became evident the deal would go through, shares of Dow Jones vaulted $5.82, or 11.3 percent, to $57.38 on the New York Stock Exchange. News Corp. shares, meanwhile, slipped 15 cents, or 0.15 percent, to $21.12. Ultimately, family members committed 37.4 percent of the company's voting shares to deal, The Wall Street Journal reported last night on its website.

The deal positions Murdoch, the Australian-born media mogul, to be the world's leading proprietor of financial news and to use The Wall Street Journal's resources and reputation to help drive his Fox News business channel, which is set to make its US debut this fall. It could also hasten the slow move toward convergence of print, broadcast, and online content and advertising throughout the news industry, prompting other companies to invest more heavily in multimedia to compete with Murdoch's spreading empire.

Beyond that, the $60-a-share purchase could spur fresh efforts by would-be buyers to breach the two-tier stock structures enjoyed by other firms like The New York Times Co., owner of the Globe, and the Washington Post Co., which concentrate the bulk of their voting shares in the hands of their controlling families.

"This deal is a warning signal to the whole industry," said Ken Doctor, media analyst for Outsell Inc., a market research firm in San Jose, Calif. "It shows that the stand-alone newspaper companies are becoming obsolete. The two-class stock structure that looked like a wall before the Dow Jones sale now look more like a climbable hill."

Bancroft family members, who together control 64.2 percent of Dow Jones voting power through a network of trusts, are descendants of the wife of Clarence W. Barron, a Boston journalist who bought Dow Jones in 1902. Unlike the Sulzberger family, which controls the Times Co., or the Graham family, which controls the Post Co., members of the Bancroft family have been largely uninvolved in management of Dow Jones while backing the quality and independence of its journalism.

On the news side, the acquisiton will test the willingness of Murdoch to abide by a separate agreement he reached with the Dow Jones board to respect the editorial independence of the Journal. Under the agreement, an oversight board including retired Associated Press chief executive Louis D. Boccardi and Massachusetts Institute of Technology Media Lab cofounder Nicholas Negroponte has been organized to monitor the integrity of the Murdoch-owned Journal.

Journal publisher L. Gordon Crovitz cited the agreement, and the board, in a letter scheduled for publication in today's editions. "Readers can rely on this: The same standard of accuracy, fairness and authority will apply to this publication, regardless of ownership," he wrote. The Journal also quoted Murdoch as saying he could add four pages of news to the paper.

Skeptics question whether Murdoch can be prevented from meddling in the Journal's news coverage, as he is reported to have done with his papers in England and Australia.

"Rupert Murdoch's track record is clear," said Louis Ureneck, chairman of Boston University's journalism department, who thinks public ownership of newspaper companies has become increasingly untenable. "He's a partisan publisher who does what's necessary to promote his politics and his business interests. This deal is one more indication that marketplace values are trumping other considerations."

But other media observers doubt that Murdoch would do anything to diminish The Wall Street Journal. "He's got a game plan, and he's buying the Rolls Royce of financial news," said Larry Grimes, president of W.B. Grimes & Co., a Gaithersburg, Md., consulting firm specializing in newspaper mergers and acquisitions. "The public doesn't have an issue with Murdoch. It's just a few people in the newspaper industry that do."

While the parties said nothing yesterday about whether News Corp. would keep or sell its Ottaway group of local newspapers, which includes the Cape Cod Times and the Standard Times of New Bedford, some features of the News Corp. plan seemed clear.

Media analyst Edward J. Atornio, managing director for the New York brokerage firm Benchmark Co., said Murdoch will seek to cross-promote the Journal and his business news television network and create "a global standard" for financial journalism and convergence.

"If he intends to build a quality financial news network, he'll need quality," Atorino said. "I think he is going to invest in The Wall Street Journal. I think he's going to add people. It doesn't make any sense for him to dilute the quality of the product he's going to buy."

Robert Weisman can be reached at weisman@globe.com.