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Covering Coverage of the Dow Jones Company

When we talked yesterday about the possibility of General Electric and Pearson PLC partnering to make a bid on Dow Jones & Co. (DJ), I didn't think opposition would rise so quickly.

The third largest shareholder in Pearson PLC, Schroders, has let it be known that they wouldn't support getting into a bidding war with Rupert Murdoch; as a matter of fact they oppose it. They don't see investing new capital in such an offer as beneficial to the company.

Richard Buxton, head of UK equities at Schroders said, "Given the firepower of Murdoch, it's difficult to see how they can structure a deal that involves at least one other party, and possibly the Bancrofts as well, that would work."

Simon Wallis, an analyst at Collins Stewart, said he could support the bid with GE if it "gave Pearson an attractive exit option.

"We'd be negative if Pearson simply put more capital behind a structurally challenged newspaper asset with no exit option." 

Buxton added the last thing that should be done would be to "pay a trophy asset multiple [Financial Times] to buy another one [the WSJ]."

This is coming back to what Microsoft (MSFT) said when they were considering making a bid, that it made no economic sense. That still holds. Any publically held company that would make a competitive bid on Dow Jones would have a lot to answer for to their shareholders.

The other thing is shareholders in these companies are already talking about if Dow Jones is bought that there should be an exit strategy in place. How would that fit into the mentality of the Bancrofts, who obviously don't know how to handle the bid by Murdoch, let alone deal with it all over again by people that may sell off other assets under the Dow Jones umbrella.

The more you look at this, the more you see a lot of the problems associated with the company as it stands. It seems that Murdoch did his homework well when he made the bid he did. Obviously they went through a number of people or potential consortiums in the deal, and came up with a price that very few could deal with.

It's not that the money can't be raised, it's the paying off of that money where the economics not making sense come in. We're also seeing that even those interested in bidding can't look at it as some type of charity case that is bought to keep the "editorial integrity" of the Wall Street Journal intact. If nothing else, this process shows that it's not really part of the equation in the mind of potential investors anymore.

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