This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Ready for the Fox Dow Jones Industrials?

But the possibility touches on a bigger point. Unless you look at what Dow Jones can do for the rest of Murdoch's empire, his bid makes no financial sense whatsoever.

Sure, The Wall Street Journal is a vanity asset, like owning the New York Yankees. But The economics of the newspaper industry are terrible and getting worse. And at these prices, a man like Murdoch is going to make his asset pay.

Just look at the numbers: When you include Dow Jones' $1.2 billion in net debt, the deal would cost News Corp. about $6.2 billion.

You have to figure he would insist on earning at least a 7.2% annualized return, which is the approximate yield right now on News Corp. bonds. That means the takeover would have to generate profits of about $450 million a year.

Dow Jones' operating income for the last three years? Try $135 million in 2004, $96 million in 2005 and $105 million in 2006.

If you see anything that looks remotely like $450 million in operating income, let me know.

It's unclear so far how much he'd pay in cash and how much in new equity. Or whether he'd look to sell some assets quickly to reduce the initial cost. But that won't change the underlying logic.

As a stand-alone asset, Dow Jones can't generate anything close to enough to justify this price.

No wonder that even in today's fevered buyout market, when any company with a pulse can attract a swarm of private-equity bidders, no one else could be found to offer $60 a share for Dow Jones. Or even come close.

Brian Shipman, a media analyst at UBS, told clients in a note that if Murdoch's offer is rejected, the stock price would probably collapse back down to the mid-$30s, which is what he believes the company is worth on its own.

The mid-$30s.

When Rupert Murdoch is willing to pay nearly double the market price for something, you know he's seeing opportunities no one else is.

Will that include the capturing more value from Dow Jones' famous index? Only time will tell.
In keeping with TSC's editorial policy, Brett Arends doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Arends takes a critical look inside mutual funds and the personal finance industry in a twice-weekly column that ranges from investment advice for the general reader to the industry's latest scoop. Prior to joining in 2006, he worked for more than two years at the Boston Herald, where he revived the paper's well-known 'On State Street' finance column and was part of a team that won two SABEW awards in 2005. He had previously written for the Daily Telegraph and Daily Mail newspapers in London, the magazine Private Eye, and for Global Agenda, the official magazine of the World Economic Summit in Davos, Switzerland. Arends has also written a book on sports 'futures' betting.
3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
NWS $14.60 0.00%
AAPL $118.03 0.00%
FB $105.41 0.00%
GOOG $748.15 0.00%
TSLA $229.64 0.00%


Chart of I:DJI
DOW 17,813.39 +1.20 0.01%
S&P 500 2,088.87 -0.27 -0.01%
NASDAQ 5,116.1430 +13.3350 0.26%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs