War at the Wall Street Journal (15 page)

Lisa, Leslie, and Chris eyed each other as the rest of the directors eyed them, watching for some significant reaction.

"Maybe we should sell the company," Leslie said, in the throw-up-her-hands way she had when frustrated by the discussion. With that, she entered a realm of consideration that had been as strongly and strictly forbidden among the elder members of her family as habitual adultery or nudity at Thanksgiving. It was suddenly a different day, one in which the unmentionable had been invited out of the dark and into the discussion. Lisa lapsed into amazed silence.

Then Christopher Bancroft leaned forward and spoke up: "Mike, when this used to happen, Roy Hammer would pound on the table and say, 'The company's not for sale.' What are you saying, Mike?"

Elefante paused briefly, looking slightly pained before rousing himself to exclaim, with as much certainty as he could muster, "No, the company's not for sale." Elefante's power over the family was more than a historical and symbolic deference to Hemenway & Barnes. He and various partners at the firm held two out of three trustee positions on well over half of the family's trusts. The other slot was typically held by a family member, but no single Bancroft had as much voting power as Mike Elefante. He, like any other trustee, could be removed from his position only through the courts, a lesson some in the family would learn, somewhat painfully, in the coming months.

The Bancrofts weren't ready to throw in the towel, they told Hock
aday. All agreed that Dow Jones would continue as an independent company. It would not become another of those papers ruined by dull corporations without taste or integrity. The
Journal
would continue as the
Journal,
their
Journal,
their family's pride and their great-grandfather's legacy. As far as the board was concerned, Zannino was busy working on his plan for the company, and the family was happy.

 

Something was shifting inside him. Sitting at the breakfast table with Murdoch that morning, Zannino felt his adrenaline begin to flow. "Yeah, I know the family says they don't want to sell," Murdoch said. "But the family has never had a number before. I have a number this time, and the number I'm thinking of is $60."

"Holy shit," Zannino thought. For a split second, he wanted to excuse himself to go to the men's room and call his general counsel, Joe Stern. Stunned by the enormity of the offer, and the automatic weight and responsibility it thrust upon him as the CEO of a publicly traded company beholden to his shareholders, he took a moment to reply. "It's not my call. It's the family's call."

"I'm not going to the family; I'm going to the board," Murdoch said, pausing. "So whom should I approach? McPherson?" he asked. "He's an academic and a new chairman. Hockaday? Nah, he'll go straight to the lawyers. What about Harvey? He's a savvy deal guy. I'm gonna go to Golub," Murdoch said. It was as if Zannino didn't even need to be in the room. Rupert had one last question, just to make sure they were on the same page: "So did I make you an offer?" he asked coyly.

"Please, Rupert. No, you didn't make me an offer. You said you were thinking of making an offer, and you were thinking of $60 a share," Zannino replied, smiling. He didn't want the offer to come in to him at a private breakfast. Everyone would believe that he had invited this. Given that the family didn't want to sell, Zannino found himself in the cross hairs.

"Fine," said Rupert.

On the way back to the office, Rich called Joseph Stern. "You'll never believe what happened," he said. He told Stern the news but wouldn't repeat the number over the phone, within earshot of the driver. "I can't tell you now. It's nuclear. I'll tell you when I get back to the office," he said. Before Zannino got back, Murdoch had called Golub and left him a message.

 

Back at the office, Zannino and Stern started making calls of their own. They alerted Art Fleischer at Fried, Frank, Harris, Shriver & Jacobson, Dow Jones's outside counsel. They called the Bancrofts' lead trustee, Michael Elefante. Zannino told Elefante the news. "I just had breakfast with Rupert Murdoch and he said he's thinking of making an offer for Dow Jones for $60 a share," Zannino said.

"Wow, that's a big number," Elefante replied.

"What do you want me to say?" Zannino asked.

"I don't know. I have to poll the family," Elefante said.

The two hung up.

"That's it, we're sold," said Stern, who was standing by Zannino for each of the calls. If Elefante couldn't say no right away, the deal was done. It was as if someone asks to buy your child, Stern later joked. If you say you have to think about it, that's a bad sign.

When Peter Kann, the company's outgoing chairman, arrived at work later that day, Zannino and Stern told him the news. "Wow, that's a big number," Kann replied, echoing Elefante. "What did Mike say?"

"He didn't say no," Zannino replied.

Shortly after he got off the phone with Zannino, Elefante called Christopher Bancroft, Leslie Hill, and Lisa Steele. Each was startled by the news, but only one decided to immediately follow up with a call to Zannino. Leslie Hill, one of the most outspoken members of her family, was always a squeaky wheel in the boardroom. She had been eager for Zannino to take the helm and liked his energy and determination to change the company. His was just the kind of new thinking the company needed, she thought.

Elefante told her Murdoch hadn't made a formal offer, but he had verbally floated a price to Zannino—$60 a share—and it seemed as if it was just a matter of time before a formal offer would come before the board. She was thrown. "Just when we were getting going on the right track," she thought. She immediately called Zannino to get the story firsthand. He told her about his breakfast with Murdoch. He talked about the benefits of the deal and mentioned that he was "a total return guy," referring to total shareholder return.

"This is a huge price," he said.

"This is not what I want to hear," Leslie said. "What I want to hear is that you love your new job and you don't want to sell the company. That we could grow the company and find other strategic partners. Convince me you can do something with the company," she pleaded.

O
N APRIL
4, 2007, the outlook for the U.S. economy was darkening. The real estate industry had peaked the year before, and concerns were mounting about the default rates of subprime borrowers. In the newspaper industry, the Chandler-family-instigated auction of the Tribune Company had turned into not an auction at all, but a desperate fire sale in which Sam Zell had agreed to buy the storied newspaper firm for $8.2 billion, far less than any of the bankers involved in the deal had originally thought it would be worth. Worse for the industry's outlook, Zell had barely been willing to put any of his own money into the deal, instead borrowing vast funds from friendly banks such as Citigroup and JPMorgan. Still, even as the world's financiers were losing faith in the newspaper industry, Rupert Murdoch was undeterred in his drive for Dow Jones. His shareholders in News Corp. had just the day before voted to approve a deal to swap the company's DirecTV unit for Liberty Media's John Malone's 16 percent stake in News Corp., which had threatened Murdoch's family control. Now, with that interloper out of the way, Murdoch was free to make his move. The CFO, David DeVoe, had been working on the structure with his deputy, John Nallen.

The day after the shareholder vote he flew with Gary Ginsberg and their families off the coast of St. Barts to spend a few days on his boat, the
Rosehearty.
Murdoch, who seemed to have put any discouraging details he had picked up about the Bancrofts' desire to sell in some unreachable compartment in his consciousness, moved forward with zeal and what seemed to be utter lack of doubt about the ultimate outcome of this transaction. Fresh from the breakfast with Zannino, he had instructed his CFO and others to prepare the formal bid for Dow Jones, a fact he had yet to share with Ginsberg, whose constant contact with the outside press and politicians made him, at that early stage, a risky confidant.

The weekend on the boat was an unusual scene of domesticity for Murdoch. His two young daughters, Grace and Chloe, saw him more than his older children had, but he only had so much time. The girls were more accustomed to life with four nannies (two from Australia and two from China), piano lessons, and shuttles between the Episcopal School and the rented penthouse on Park Avenue. The Murdochs were renting the Trump Park Avenue apartment until their $50.8 million purchase, the late Laurance S. Rockefeller's Fifth Avenue penthouse, was ready. Rupert had been eyeing the Rockefeller apartment at 834 Fifth Avenue his entire adult life. Back in the 1970s and early 1980s Murdoch had lived in a $350,000 duplex in the same building. Then, Murdoch was new to New York and Rockefeller was the chairman of the co-op board. Murdoch had attended a few shareholder meetings in the twenty-room, eight-thousand-square-foot triplex with a broad terrace. For Murdoch, the penthouse would be completely renovated by famed French designer Christian Liaigre, who had done Rupert and Wendi's previous apartment. For a few years, the Murdochs had lived in SoHo, when Lachlan and James were still in New York and Wendi was new to the city. In the SoHo apartment, Liaigre had installed a fully outfitted gym and a large screening room and turned the attached water tower into a dollhouse for the girls. Once Lachlan and James left, Murdoch felt the neighborhood was inappropriate for children and planned the move uptown.

The renovation project was taking longer than expected. Wendi would complain to the other mothers at the Episcopal School, who mocked the heavy Chinese accent of the nouvelle arriviste. "Rockefeller apartment, fifty-point-eight million," they would say, replacing the
L
s with
R
s to mimic Wendi's staccato speech. "But we had to put twenty million into it. Gut renovation." They whispered more, in front of the school, as the chauffeur and the nanny climbed out of the black SUV with tinted windows and dropped the girls off. "Those poor things. They never see their parents." The self-appointed minders of Grace's and Chloe's well-being worried especially on fathers' day at school, a Wednesday every year when devoted dads took the afternoon off to pick up the kids and get their photo taken together to be displayed in the school's halls. One year, Grace's photo stood out from the pictures of the other students. She had posed for her portrait arm in arm with the chauffeur, George, not her father. The mothers clucked with amused disapproval. Wendi noticed, and the next year Rupert showed up, but, the story goes, he stayed for only seven minutes and left the moment the flashbulb snapped.

When Ginsberg and Murdoch returned to the office on Monday, April 9, Murdoch, without any ceremony, stood in his office and announced bluntly to Ginsberg that he was about to bid for Dow Jones. Never mind that they had just spent the weekend together and Murdoch spoke not a word of his plan; Murdoch typically had enough going on that he couldn't be completely honest with any single person, much less the executives who had a stake in his action.

Then, with the same deliberation with which he had avoided the topic the weekend before, Murdoch started to talk about it nonstop, mainly to his board members, whom he was preparing for their regularly scheduled board meeting the following week. Murdoch knew a deal like this one at a time when newspapers had utterly lost their appeal as a business had to be seeded carefully with his board. One by one, he called his directors and pitched them. As was typical, none objected—the closest thing Murdoch got to internal resistance was from his chief operating officer, Peter Chernin, who didn't share Murdoch's irrationally exuberant passion for print—and the following Tuesday, the board unanimously approved the offer. Even if one couldn't justify the deal in business terms, the company, with almost sixty thousand employees spread across the globe, seemed to be made up of only one person. His passions had created the business and they would dictate it, for better or worse.

Later that day, the offer letter arrived by messenger at the offices of Dow Jones & Company. Addressed to company chairman Peter McPherson (who was the following day taking up his official post at the company's annual shareholder meeting), it outlined News Corporation's offer for Dow Jones: $60 a share in cash, then a nearly 70 percent premium over Dow Jones's recent share price. The letter praised the company and flattered its management. It invited McPherson and company advisers to a meeting "to discuss all aspects of our proposal, and to answer any questions you or they may have." It requested—"Although we have already completed a thorough due diligence review based solely on publicly available information..."—a meeting to begin a more detailed review of Dow Jones's financials. "We aim to promptly conclude a transaction that is enthusiastically supported by you and your Board of Directors, stockholders and employees," the letter said in closing. "We look forward to hearing from you."

When the envelope with the offer arrived, Zannino was expecting it. Murdoch had called Zannino shortly after their breakfast. "I wanted to know when your next board meeting is," he said. Zannino replied, coyly, aware of the sensitivity now of his interactions with Murdoch: "Rupert, I think if you look at the public record, you'll see when we have a board meeting, with the annual meeting, and we posted the date."

"Save me from looking it up. When's your annual meeting? Our meeting is April 17," Murdoch said. Zannino relented and told Murdoch that the board meeting was April 18.

"I'll get to you before the board meeting," Murdoch replied.

So on April 17 when Zannino saw the envelope sitting on his desk—from News Corporation and addressed to the chairman of Dow Jones—he and Joe Stern opened it, knowing what to expect. They read the offer, which contained the same eye-popping price Murdoch had promised to him two and a half weeks earlier. Then they immediately arranged a call for the directors to alert them that the letter had arrived.

 

April 17, 2007, on the eve of Dow Jones & Company's annual meeting, the forty-five-year-old Marcus Brauchli was in his tiny office on the northwest corner of the
Journal
's ninth-floor newsroom, an unusual place for the global news editor. Most of the time he wasn't office-bound and could be found moving quickly through the news room, engaging his fellow editors in quick conversations or, just as likely, moving out the door to meet with someone more important.