Yahoo! Should Buy Dow Jones

The media spent the weekend all abuzz over Rupert Murdoch's bold $5 billion bid for Dow Jones (DJ - commentary - Cramer's Take). The synergies between the Wall Street Journal and News Corp.'s (NWS - commentary - Cramer's Take) pending Fox Business Channel makes obvious sense. And despite the pre-existing agreement between Dow Jones and General Electric's (GE - commentary - Cramer's Take) CNBC unit, it would certainly rattle the execs at NBC Universal (GE's media division) -- something you suspect Murdoch might enjoy.

A parallel story line was the resurrection of the Microsoft (MSFT - commentary - Cramer's Take) acquiring Yahoo! (YHOO - commentary - Cramer's Take) rumor that has been around for years. I do not see that as a winning combination. The vast majority of Microsoft's profits come from Office and Windows (Vista), followed by Database SQL. The company's Web properties do not contribute a whole lot to the bottom line.

Then on Monday these two separate M&A stories serendipitously came together when a few subscription-only Barron's columns "accidentally" showed up on the free Yahoo! Finance section. Which got me thinking ...

The most natural acquirer for Dow Jones would be GE (more on this below). But if GE is not interested, then the next most intriguing buyer could be Yahoo!

Its market cap is more than $41 billion, so the company could easily absorb Dow Jones in an all-stock deal, matching Murdoch's $5 billion offer. They would also be a white knight much more acceptable to the major and minor family shareholder groups. The Bancrofts, who own a majority of the controlling stock, have been rather equivocal in responding to Murdoch's offer. But nearly as important have been the minority shareholders, most prominently, the Ottaway family trust. They released a scathing statement saying that "a takeover by Rupert Murdoch's News Corporation would ruin Dow Jones and its crown jewel, The Wall Street Journal."

All things considered, a combination of Yahoo! and Dow Jones makes much more sense than either a News Corp./DJ pairing or the recently rumored Microsoft/Yahoo! coupling.

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As originally published, this column contained an error. Please see Corrections and Clarifications.

At the time of publication, Ritholtz and/or his firm was long GE, although holdings can change at any time.

Barry Ritholtz is the chief market strategist for Ritholtz Research, an independent institutional research firm, specializing in the analysis of macroeconomic trends and the capital markets. The firm's variant perspectives are applied to the fixed income, equity and commodity markets, both domestically and internationally. Other areas of research coverage also include consumer, real estate, geopolitics, technology and digital media. Ritholtz is also president of Ritholtz Capital Partners (RCP), a New York based hedge fund. RCP is driven by the analysis performed by Ritholtz Research. Ritholtz appreciates your feedback; click here to send him an email.