Stakes high in talks on Dow Jones

As it assembles at the Boston Hilton today to consider selling Dow Jones & Co. and its main prize, The Wall Street Journal, to Rupert Murdoch's News Corp., the controlling Bancroft clan faces some stark choices.

Financially -- and journalistically -- the stakes are high.

Before the bid became publicly known, the Bancrofts' shares were worth less than $750 million. At $60 a share, the price tentatively agreed to with the News Corp., their stake is worth more than $1.2 billion, a difference that could approach $500 million spread out among more than 30 family members.

"They are not so well off as to be able to scoff at Murdoch's money," said James H. Ottaway, a major shareholder and retired Dow Jones executive. He says Dow Jones would continue to thrive independently and he wants the Bancrofts to reject the offer. But, he conceded, "it is asking them to give up quite a lot, at least in the short run."

Money will not be the only issue, as the family considers its century-old legacy and the prospect of The Journal being in the hands of a company and an owner whose newspapering many family members dislike.

The Bancrofts will hear a briefing from their advisers on the takeover tentatively approved by the Dow Jones board Tuesday, and then they will take several days to ponder the matter before their lawyers poll the adult family members.

Assuming that all the shareholders outside the Bancroft and Ottaway families favor selling, less than one-third of the Bancroft family's vote is needed to gain majority approval for the deal.

Measuring factions within the private, deeply divided family is difficult, and members can change sides; people close to them say it could go either way. At least one board member, Christopher Bancroft, has said he is strongly opposed.

Over the long term, their decision picture is shaded by differing views of the prospects for Dow Jones if they don't sell. The company has made some bold moves in recent years, but the newspaper industry is in a sharp downturn. Yet even the most optimistic executives have not talked about making the company worth nearly the value Murdoch has placed on it, and if the Bancrofts reject his offer, the stock could even fall below the $36.33 closing price the day before the offer.

There is another proposal, this one from Brad Greenspan, a founder of MySpace. Greenspan proposes to lend the Bancroft family $400 million to $600 million to buy out members who wish to sell. But it isn't known how seriously his offer is being considered.

The agreement negotiated with Murdoch provides that some shareholders can exchange some stock for News Corp. shares. But even if the Bancrofts took only cash and paid capital gains taxes, they would still have significantly more than they had in April.

Dow Jones stock pays $1 a year in dividends, or $20.6 million to the family. But the money from a sale to the News Corp., invested elsewhere, could generate several times as much income.

The Bancrofts have sold millions of Dow Jones shares over the last two decades and made other investments, so that some parts of the family have become much less dependent on the company for their living.

The family's dividends are spread among many people, primarily the eight members of the oldest living generation, and one person in the next generation, who collect most of the income, according to family members and people close to them, who were granted anonymity to discuss private matters. That works out to less than $2 million a year apiece.

Smaller amounts go to the more than two dozen children of the older generation, some of whom have adult children of their own.

Most of their Dow Jones stock is in dozens of trusts, typically with three trustees who must vote unanimously to sell. In most cases, a trust has one family member trustee, and two of the family's lawyers or bankers.

If the Bancrofts overwhelmingly reject the deal and it falls through, what happens next is unclear. Some analysts and bankers have predicted that the Dow Jones share price will plummet below where it was earlier this year. Others have said it will remain relatively high -- though probably nowhere near $60 -- as investors anticipate that Murdoch or someone else will make another run at the company.