Family Vote: Take $5 Billion or Keep WSJ?

July 18, 2007 — -- The fate of the Wall Street Journal and its parent company Dow Jones is in the hands of the family that has long controlled -- but from a distance -- the bastion of American financial news.

The Dow Jones board voted late Tuesday night to sell the company to Rupert Murdoch's News Corp. for $5 billion. The Bancroft family, which controls the majority of the voting shares of the company, will meet Monday possibly to decide on the sale, a family spokesman told ABC News.

The battle over the paper's future is essentially a tale of two families. They both have power and influence over the world's media, but that's where the similarities end.

Rupert Murdoch, head of one of those families, has been trying for more than two months to buy out the holdings of the Bancrofts.

Analysts say Murdoch is anxious to own the Journal brand, which he will likely use after he launches a new business television network scheduled to go on the air in October. The operation, now named Fox Business Network, would likely become the Wall Street Journal Channel in what is likely to be a hard-fought battle with biz-net CNBC for ratings. Dow Jones also has something else Murdoch wants -- online news outlets that users are willing to pay to gain access to.

And the Dow Jones empire was available at a bargain price. Shares were languishing in the $30 range because Dow Jones was an low-growth, old-line media company facing increasing economic pressures. The national media company's market cap was less than $3 billion, the kind of money Murdoch's global empire could shell out quite easily.

The Bancroft family initially rejected News Corps.' bid but later opened up to it after Murdoch agreed to protect the editorial independence of Dow Jones outlets with an outside board. Murdoch's conservative politics and aggressive management style have earned him a reputation as being willing to toss objectivity to the side when money or power are to be had. The outside board, which would have control over hiring and firing the top editorial leaders at the various properties, has quelled some of the early concerns over the bid.

There now seems to be a split as some -- presumably younger -- members of the family want to cash out while another part of the family wants to hold onto the paper, or at the very least, not hand it over to Murdoch.

The family has been publicly silent throughout this whole process.

At least one family member and board director, Christopher Bancroft, has been actively trying to block the deal. Another family and board member, Leslie Hill, has been trying to find other buyers. These reports and just about all other news about the sale have been reported in the Journal. Attempts by ABC News to speak with family members have been declined.

Like Night and Day

Murdoch is a brash media titan known for his hands-on approach to managing his news outlets and, from time to time, the content.

The Australian took over his family's business after the sudden death of his father in 1952.

His oldest son, Lachlan, was an integral part of the company but left after a family dispute. Lachlan's brother James has now filled his role.

The Bancrofts are almost polar opposites.

The Boston family doesn't involve itself in the day-to-day decisions of its media properties. And unlike Murdoch, who often puts himself in the spotlight, they are rarely seen.

"The Bancroft family isn't by and large involved in Dow Jones," Benjamin M. Compaine, co-author of "Who Owns the Media?" and a researcher on media competition, told ABC News. "You've got a lot of second- and third-generation Bancrofts for whom it is an investment."

The personalities are even reflected in the news outlets each owns -- the refined Wall Street Journal and Murdoch's News Corp., which includes Fox News and the New York Post.

While the Bancrofts own only part of the company's shares, they keep an ironclad grip on its operations. The Bancrofts set up a two-tiered stock structure that essentially guarantees them control over the company's future.

Because of this two-tiered system, the family controls 64.2 percent of the votes, even though it owns only 24.7 percent of the overall stock.

But with three dozen members of the family, there is no guarantee that all shares will vote as a block.

Recent media reports indicate that about half of the Bancroft family shares seem to be leading toward a deal at this time. That bodes well for Murdoch's bid.

Michael B. Elefante, the family's Boston lawyer and representative on the Dow Jones board, is a partner in Hemenway & Barnes, the law firm that has represented the Bancroft family for decades. For three decades, Roy A. Hammer -- also a partner in the firm -- represented the family's interests but has recently shifted the responsibility to Elefante.

Elefante has a large amount of control over the trusts, but recently has appeared to take a back seat.

Birth of an Empire

The Wall Street Journal was first published in 1882 by Charles Dow and Edward Jones.

The company was sold in 1902 to Clarence Walker Barron. When he died in 1928, the paper was passed on to his stepdaughters, Jane and Martha. Jane's husband, Hugh Bancroft, took over the company but killed himself in 1933.

Jane W.W. Bancroft's descendants now own the paper, but family members haven't actively managed the company since Hugh Bancroft.

Jane Bancroft Cook, the last surviving child of Jane, died in 2002 at the age 90. The company is now in the hands of Bancroft's grandchildren and great-grandchildren.

The New York Times Co. and the Washington Post Co. have stock structures similar to Dow Jones', which allows the Sulzberger and Graham families almost complete control over their respective media conglomerates.

The Bancrofts, however, are nowhere near as involved in the operations of Dow Jones as the Sulzberger and Graham families are in their media companies.

For the past two years, shareholders of The New York Times Co. have tried unsuccessfully to strip down some of the Sulzberger and Ochs family power.

Arthur Sulzberger Jr., the company's chairman and publisher of its namesake newspaper, has long held that the company would not change its dual ownership structure. Sulzberger said that such a setup allows the company to maintain its journalistic independence and weather economic downturns.

Family-owned newspapers face increased pressure to sell, and their ownership gets diluted among more family members in subsequent generations. As those generations take on other jobs, family ownership dissipates further.

For instance, the family of former Vice President Dan Quayle recently sold its newspaper after more than 70 years of family ownership. The vice president's brother was president of the company until the sale, which the family attributed to the "challenging days for this business."

The Bancroft family includes investment bankers, writers, equestrians and philanthropists, according to a 2003 article in the New Yorker.

Leslie Hill, an American Airlines pilot and member of the family, spoke to the magazine about a possible sale, saying at the time, "Anything is possible -- you never say never."