Third, the whole thing is awkward because, as the Journal itself reported, Crovitz, Brauchli, Gigot, and others have consulted with the family on how to maintain the paper’s editorial integrity in the event of a sale. Brauchli, in particular, in on the hot seat. He is responsible for the (Steiger-led) coverage, while talking to the family about the terms of the deal, including potentially those involving his own job.
This is a problem. Is it manageable? I’d say so, but there it is.
Am I suggesting editorial executives would compromise coverage because a News Corp. deal might include a job guarantee? No.
However, business-press readers should know where key parties’ interests lie and be on guard against the assumption that if there isn’t any deal—say this whole thing goes away— something bad will necessarily happen. Remember, deals are generally good for people directly involved in them, but not necessarily for the buying entity, the seller, their investors or consumers.
A certain momentum takes hold. Generally speaking, if a deal goes through, people involved get paid. This includes investment bankers, lawyers and advisors of many stripes. Executives at the buying company are also happy, in part because they are running a bigger company. This is why you don’t see many closing dinners at KFC.
I’ve written about the deal infrastructure which includes the business press. But news and business-side executives have strong economic incentives running in favor of a sale, and it is fair to point those out.
At year-end 2006. Steiger owned DJ securities worth $8.7 million with the offer, and $5 million without it.
Crovitz owned securities worth $12 million with the deal, $7 million without it.
Rich Zannino, Dow Jones’s CEO, stands to receive $23.5 million if the offer goes through and he is severed within two years. That’s called being set for life. If the deal doesn’t go through, he gets to go back to work. He has told the controlling Bancroft family that DJ will not be able to get to News Corp.’s $60-a-share offer anytime soon, which is no doubt true. Again, having a big stake in a sale doesn’t mean he’ll push for it. But, still, the man’s human.
As today’s Journal makes clear, some family members question the motives of even the family’s own lawyer, Martin Lipton, the famed deal lawyer and the “Lipton” in Wachtell Lipton:
Meanwhile, some family members privately have voiced concern about potential conflicts faced by Mr. Lipton and their other advisers. Mr. Lipton’s law firm, for instance, in 2004 worked for News Corp.’s independent directors as part of a $50 billion plan to move the media conglomerate’s home base from Australia to the U.S. And in the same year his firm was tapped as the “external legal counsel in the U.S.” by a special committee of News Corp.’s nonexecutive directors to consider an acquisition. Some Bancrofts have questioned whether the previous ties with Mr. Murdoch would lead advisers to push for a deal with him. Mr. Lipton declined to comment.
Generally speaking, deal lawyers get paid a lot more handling a sale than just billing by the hour giving advice. We’re talking about millions of dollars.
Point is: As the Bancroft draft memo makes clear, Dow Jones executives, editors, and other actors have very big economic stakes in the outcome, all running in the direction of a sale. Business-press readers should be aware of these as they try to figure out what’s best for the nation’s leading financial daily. After all, Dow Jones changes hands less than once a century.
And, remember, nothing has to happen. The idea that it does comes from News Corp. PR and crybaby shareholders, like The Audit, owner of 344 shares, who don’t want to lose the value of the offer.
Business-press readers shouldn’t care about any of that.