The Devil You Know

The Bancrofts really have no choice. There are no other offers, the outlook for the industry remains challenged, and maybe more to the point, there will be lawsuits if they vote down the deal.
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One can forgive the Bancroft family for actually thinking they have a choice. Think about it. When the company went public, the family was able to maintain control despite selling an economic interest to the public. They did this by issuing two classes of stock and retaining a voting majority. In that context, their recent attempts to negotiate a sale of the company whereby they maintained operating control don't seem quite so farcical.

However, even in that context, the way too public debate on the fate of the company was pretty revealing. At the same time certain family members expressed concerns about journalistic integrity under a Murdoch owned Journal, they themselves were trying to obstruct what should have been a relatively straightforward opportunity to surface value for shareholders -- all shareholders.

While Wall Street Journal reporters are doing a good job of reporting on the negotiations and ballyhoo from the family members, they, and others, aren't really got to the heart of the matter which is that the family really has no choice. There are no other offers, the outlook for the industry remains challenged, and maybe more to the point, there will be lawsuits if they vote down the deal. At least one family member figured that out as they stepped down as trustee in the late innings. Had this happened in any other industry than their own, Journal reporters would have had a heyday ripping to shreds the efforts to stymie the deal.

I can appreciate the hand wringing that comes with a Murdoch owned Journal but his track record is fairly straightforward and in the public domain. Now that the Bancroft family exposed their own double standards, I, for one, would be happier with the devil I know. Further, as a 19-year veteran of the Street as sell-side analyst, I would further submit that the Journal is not beyond reproach as I recall more than one instance, where, as an informed observer of a company, their reporting on that company was full of innuendo and seemingly made efforts to influence rather than inform. Yet, in my mind, there is no doubt that the Wall Street Journal, editorial page notwithstanding, is the best paper in the country.

Reporters at many papers across the country have deep concerns regarding the future of their business. There seems to be a sense of entitlement that since what they are doing is important, it should be guaranteed survival. Unfortunately, while I agree completely that what they are doing is important and essential to preserving democracy, the business model is being undermined by the rapid shift of formerly lucrative classified ads to the Internet. Yes, declining circulation is a concern but not as big a one as the shift of classifieds which hits more to the core of the current pressure on cash flow. Newspapers need to reinvent themselves both online and off and accept that future returns will be much lower. Difficult decisions need to be made such as acknowledging that a paper can't be everything to everyone.

News Corp's willingness to pay a large premium for Dow Jones is an acknowledgment that what the Wall Street Journal does is important. But it is also a confirmation that resources need to be leveraged across mediums. In my humble view, the family can be forgiven for thinking they could get away a second time with selling but maintaining control but not for trying to extract an even greater price. They always had the choice of putting their own money where they mouths were and taking the company private. The industry probably should be private as the returns are no longer attracting capital.

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