Bancroft blocks Murdoch’s Wall Street Journal ambition

A key member of the family that that owns the Wall Street Journal has announced his opposition to Rupert Murdoch’s $5 billion takeover bid of the newspaper. Christopher Bancroft is one of three siblings who have the controlling stake of the Dow Jones company. Bancroft told his own paper he thought a sale would endanger the Journal’s independence. “I’m open to any situation that benefits The Wall Street Journal and Dow Jones and its shareholders. At the moment, I don’t see anything that would do that,” he said.

The Bancroft family own a 64% share of Dow Jones voting stock. On 1 May, News Corporation put in an unsolicited proposal to acquire all of the outstanding shares of Dow Jones common stock and Class B common stock for $60 per share. The Bancrofts immediately indicated they were opposed to the approach from Murdoch's News Corporation. But that hasn’t put off Murdoch. He has appealed directly to the family and proposed a meeting between them and his own family to thrash out a deal.

Wall Street itself is also confident that the parties can agree a deal as the Dow Jones share price has increased since news of Murdoch’s bid first emerged a month ago. The Wall Street Journal would represent a vital strategic asset to his news empire. It is widely regarded as the business bible and is the second largest circulation newspaper in the US after USA Today. It had a worldwide daily circulation of more than 2 million in 2006, with 931,000 paying online subscribers. It has international editions, the Dow Jones news wire, Dow Jones Indexes, Barron's, The Far Eastern Economic Review and MarketWatch.

Murdoch’s problem is that the Bancroft family represent very old wealth and they don’t see eye to eye with the brash newcomer and his corporate raider ways. One family member William Cox Jr said last week "If you give it to Rupert Murdoch, it'll be ruined”. The family is split into three branches all descended from the grandchildren of Clarence Barron. Clarence bought Dow Jones in 1902. The Ottaway family controls a further 6% of the crucial super-voting shares, has also indicated its opposition to Murdoch's "Australian-British journalism" and its "personal and political biases". Murdoch meanwhile has maintained he would not interfere with the paper’s editorial operations. "Your record of journalistic independence and integrity is second to none," Murdoch said. "Any interference [is] something I am unwilling to countenance. Apart from breaching the public's trust, it would simply be bad business”.

The Wall Street Journal has represented good business for the Bancrofts over the years. Its beginnings date to 1882 when Dow Jones and company was founded by three reporters Charles Dow, Edward Jones and Charles Bergstresser in a small basement office at 15 Wall Street in New York. The Company began by producing daily hand-written news bulletins called "flimsies" delivered by hand to subscribers in the Wall Street area. A year later they produced the "Customers' Afternoon Letter” in which Charles Dow first published the Dow Jones averages. They hired Clarence Barron as its Boston correspondent and in 1889 changed the name of the afternoon letter to the Wall Street Journal. It contained four pages and sold for two cents with advertising 20 cents a line. At that time, the Company had 50 employees.

The company launched many innovations including the Dow Jones Industrial Average, a “review and outlook column” and the “ticker” service. The Wall Street Journal added a morning edition in 1898. When Charles Dow died in 1902, Clarence Barron bought control of over the company and the newspaper. Barron made a down payment of $2,500 to buy Dow Jones from its founders. Barron was highly driven with a strong ethical purpose. On the wall of his office he posted his credo which read: "The Wall Street Journal must stand for the best that is in Wall Street and reflect that which is best in United States finance. Its motto is: The Truth in its proper use."

One of Barron’s adopted daughters married Hugh Bancroft from one of Boston’s Brahmin families. When Barron died in 1928, Hugh Bancroft became president of Dow Jones. Although Casey Hogate succeeded Bancroft in the 1930s as president, voting power stayed with the Bancroft family. Hogate did however make substantial changes to the newspaper including ending the afternoon edition. The paper’s reputation soared after the war as it won a string of Pulitzer Prizes. Dow Jones expanded by buying the Ottaway newspaper chain and creating the Asian Wall Street Journal. It produced its first online edition in 1995 and formed the business television station CNBC in alliance with NBC two years later.

Through all this time the Bancroft family have maintained their tight control of the board of Dow Jones. The company is structured to give voting control to a family trust, even though they only own 25 per cent of shares. The family owns 82 per cent of class B, or "super-voting" non-transferable shares, which count for 10 votes a share. Murdoch's reputation as a meddling proprietor remains the biggest stumbling block. Newspaper analyst John Morton said he judged Murdoch’s chances of success to be nine-to-one against. "The Bancrofts have always taken the position that any outside owner would threaten the independence of the newspaper," said Morton. "I could be wrong - he could raise the price which could stir up sentiment in his favour”.