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Buffett: Dow Jones Bid Not High

Nat Worden

Legendary value investor Warren Buffett said Monday that News Corp.'s (NWS Quote) $60-a-share offer for Dow Jones (DJ Quote) is "not a high price" for the publisher of The Wall Street Journal.

In an interview with CNBC, the chairman and CEO of Berkshire Hathaway (BRK-A Quote) said the Bancroft family, the controlling shareholders of Dow Jones, could always get $60 a share for the company. The price has been viewed as particularly lofty because it amounted to a 67% premium to where the company's stock stood before the bid became public last week.

"That's not a high price for Dow Jones if you add the psychic income that you get plus the cash income," said Buffett. "So it's not like they're turning down the deal of a lifetime if they turn it down."

Dow Jones raised hackles on Wall Street last week when its board declined to take action on News Corp.'s $5 billion bid for the publisher, citing a majority of opposition to the offer on the part of the company's controlling shareholders. The Bancroft family trust controls 68% of the voting rights at Dow Jones through a dual-class share structure.

News Corp. Chairman and CEO Rupert Murdoch has long expressed a desire to own The Journal, but many of the living members of the Bancrofts, whose ancestors built Dow Jones into the most powerful publisher of business and financial news in the world, are reportedly unwilling to sell to the owner of Fox News and the New York Post due to concerns about preserving The Journal's editorial standards.

Members of the Ottaway family, which acquired a 6.2% stake in the company's voting shares when it sold a chain of community newspapers to Dow Jones in 1970, expressed those concerns in sharply worded statements on Sunday.

"The sale of Dow Jones to Rupert Murdoch and his News Corp. global media giant would lead to loss of the unique news quality and integrity of The Wall Street Journal and other Dow Jones publications and Internet services, and loss of the independence and integrity of a leading national editorial voice," said Jim Ottaway Jr., a trustee for most of the family shares and a former Dow Jones executive and board member.

His son, James W. Ottaway, said, "As an investor, I would be very concerned to live in an era of making investment decisions based on the Murdoch-filtered business information. As a citizen, I would be afraid to live in a world where news is solely entertainment, and there is an agenda behind every story I read, watch or hear."

A spokesman for News Corp. told The Journal that the company is disappointed by the Ottaways' comments, "which unfortunately are based on tired misconceptions and clichés." Murdoch is seeking a meeting with them to explain his position, the spokesman said.

Turning the Page on Newspapers

Buffett, who has invested in newspapers like The Buffalo News and The Washington Post (WPO Quote) , also said it is "very, very unlikely" that he would launch a competing bid for Dow Jones, but he did not rule it out completely.

"I couldn't do it for Berkshire," Buffett said, citing an unwillingness to make investments for Berkshire shareholders that don't make pure economic sense. "I don't do anything for Berkshire that's un-economic. I do some things for myself that aren't economic."

He acknowledged that while Dow Jones does have some synergies with the rest of News Corp.'s portfolio from a business standpoint, there is an appeal to any potential buyer that goes beyond economics given The Journal's stature.

"There are people around the world who would salivate at buying The Wall Street Journal, and they have big checkbooks," said Buffett.

At Berkshire Hathaway's annual shareholders' meeting over the weekend, Buffett defended Dow Jones' dual-class share structure -- a setup that is also employed by Berkshire, as well as companies like Washington Post, New York Times (NYT Quote), Google (GOOG Quote) and News Corp.

The dual-class structure, which allows business owners to sell shares of their companies to the public without surrendering voting control, has come under fire at Dow Jones and its newspaper counterpart, New York Times. Both have refused to sell assets to deep-pocketed buyers, denying short-term gains to shareholders that are getting nervous about the future of newspaper publishing.

For its part, the Times has been criticized by Morgan Stanley Investments portfolio manager Hassan Elmasry as being unaccountable to shareholders due to its corporate structure and misusing its capital as a result.

"I don't blame the dual-class structure for anyone's losses at the New York Times," said Buffett, referring to the stock's 50% slide over the last four years.

He attributed the recent weak performance of the newspaper industry to the ongoing technological changes in the media wrought by the rise of the Internet and other digital technologies, along with the accompanying cultural changes.

Buffett predicted the next generation of newspaper owners will likely be motivated by the political and social influence that those assets wield as opposed to the economic rewards that they bestow.

"The truth is, the world has changed in a significant way," he said.