Corporate 101: Murdoch Wins the Wall Street Journal

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The New York Times has provided a nice article wrapping up this highly predictable result and giving some space for everyone to say how awful it all is. Honestly, for all the sorrowful violins playing, you’d think the cat had died.

The litany of horrors is the same: “Loss of independence”, “editorial integrity”, gargle, gargle. This isn’t media ethics, it’s mouthwash. Anyone who thinks the financial press is some sort of mass producer of ethics and enlightenment is either out of their minds or just can’t read. When Enron was at its worst and most overvalued, who was telling the public? There’s a list of all this moral righteousness going back to the South Sea Bubble. However, how could we have a “free press” if it wasn’t able to remind us all how honest and sincere it is once in a while?

What’s bothering me is how badly opposition to this bid was handled and how utterly it was misread. It was abysmal. This was a fait accompli before it began. The half-baked approach to opposing the takeover was almost unbelievable to me. Everyone’s told from birth how sharp American business is, how tough, how insular, how network-based it is. The entire media stood on its integrity, its editorial honesty, and its devotion to the public interest.

None of which meant a damn thing in this case. I don’t really think people who couldn’t appreciate how Murdoch played this move deserve to be in business. But maybe Corporate 101 is needed here, just so someone understands what happened.

So:

1. Murdoch was the guy holding the pot in the poker game, making a bet nobody else could meet.

2. The opposition were scared of him. You don’t beat anyone by being terrified of them.

3. The Wall Street Journal was a financially enfeebled, antiquated, paper, living on handouts and cost cutting. Compared to News Corp, it’s neither big time or big money. It’s big quality material, however, and that is the only thing worth paying for about it. It’s the only reason anyone buys the thing.

4. The white knight rescuers should have known better and so should the Bancrofts. They glued together a couple of wannabe packages, on nothing like the scale of the News Corp offer. No bet, too small, didn’t match the original bet, even in theory.

5. Talk is cheap, and in this case it was much too cheap for the stockholders, the trusts, and some of the Bancrofts. All the BS wound up meaning nothing.

6. He really said “take it or leave it” when he said it was highly unlikely the bid would proceed without a higher level of acceptance. They took it. They wanted more money, but he shot down that option a month ago. Ethics had very little to do with the price haggling.

7. He could afford to wait, they couldn't. Saying "no" would have cost the Bancrofts a billion or so. As things now stand, he's now right on schedule for the launch of the new financial news network, with the Wall Street Journal.

What stuns me is that nobody bothered to do any sort of analysis of the bid itself. That price was a category killer. Why in the name of Little Green Indices didn’t anyone wake up to that? The funds would have been foaming at the mouth to take that offer. The other stockholders certainly were.

The funds and trusts are another little issue that got scant attention but are quite relevant. One of the trusts was said to be afraid of being sued for mismanagement if it didn’t accept the offer. Ethics, indeed. Lawsuit, almost definitely.

Wait for the movie to come out, probably on Fox.

Then there’s the $30+ million of legal fees for the Bancrofts. Compared to the bid, peanuts. That was another haggling point. The Bancrofts are having their fees paid, by Dow Jones, aka a subsidiary of News Corp. Ethics? Where? (Note: the NYT article says "up to $40 million" for fees, but the $30 million is the widely figure.)

So there we have it. Another triumph of epic air circulation by media moralists. Result, zip. How to dig a hole, bury yourself, and claim moral superiority while losing the poker hand you were supposed to be playing.

Americans might be interested to hear that this would have been in some ways one of the most tactically primitive takeovers in which Murdoch has ever been involved. No real opposition, just a lot of irate, second rate, losers who couldn’t cover the ante.

Some poker game.

Try tiddlywinks. It’s safer, and much less embarrassing than this sort of amateur hour business deal.

Update:
News Corp current statement includes Dow Jones website quote link