Dow Jones (DJ) shares are off a bit today on news that Rupert Murdoch and News Corp (NWS) will not raise his bid for the parent of The Wall Street Journal. It’s $60 or nothing. And, Murdoch says, if he does not have a firm deal in two to three weeks, it’s nothing.
The news brought all kinds of speculation that shares in Dow Jones would collapse back into the $30s, and, they would.
That only leaves open the question of what the company’s founding family, the board, and management would do to convince investors that it is not the end of the world. There is a plan. It just may take awhile, but perhaps less than the seven years it has been since the stock last traded at $60.
One of the intelligent deals that was considered when other bidders where looking at Dow Jones was putting it together with Pearson’s (PSO) Financial Times and GE’s (GE) CNBC. Create a little financial news empire in print, online, and on TV. That did not work.
But, putting The Wall Street Journal together with the FT does make sense, a great deal of sense.
Pearson is now primarily an education publisher. The Financial Times is, by industry estimates, worth about $1.4 billion. If Mr. Murdoch goes away, Dow Jones (DJ) will have a market cap of about $3.5 billion. The American company might have to take on debt to close a deal, but debt can create excellent discipline for a mangement that seems to have lacked same. And, debt makes a company somewhat less attractive to the the raider crowd.
In 2006, Dow Jones Consumer Media, mostly The Wall Street Journal, had revenue of $1.123 billion. Operating income was a modest $34 million. WSJ.com had a good year with subscriptions rising 6% to 811,000. But revenue from international operations was only about 6% of the total.
The Financial Times has 450 journalists and 23 editions around the world. Most of the paper’s circulation is in Europe and it has a strong operation in Asia.
How much money could The Wall Street Journal save by combining some of its operations with the FT?
A lot. Plants, People, Distribution. Probably $75 million to $100 million. A lot of cake.
Douglas A. McIntyre can be reached at email@example.com.