Rupert Murdoch may take until the end of 2010 to show he was right to pay $5.2 billion for Dow Jones & Co. The takeover was completed today.
By that time, Murdoch’s News Corp. should be able to double Dow Jones’s pretax cash flow to $600 million, giving it a 12 percent return on the purchase, said Larry Haverty, a fund manager at Rye, New York-based Gamco Investors Inc. Dow Jones may start adding to News Corp.’s profit in 2009 following investments next year, said Laura Martin, an analyst at Soleil Securities in San Marino, California.
“It’s not a quick strategy,” said Haverty, who helps manage Gamco’s $30 billion in assets, including $308.1 million of News Corp. shares as of Sept. 30. “Where he’s going, we’re very comfortable with it. It’s just going to take three years.”
Dow Jones shareholders with more than 60 percent of voting power approved the takeover today. Murdoch offered $60 a share, or 65 percent more than Dow Jones’s stock price of $36.33 on April 30, to win over the Bancroft family that has controlled the New York-based company for more than 100 years. Until the Murdoch bid, the shares had dropped 53 percent since June 2000.
News Corp. Class A shares fell 10 cents to $20.70 at 4:03 p.m. in New York Stock Exchange composite trading. They have lost 3.6 percent this year. Dow Jones advanced 1 cent to $59.98.
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In addition to the Wall Street Journal, the purchase adds Barron’s, Dow Jones Newswires and the Factiva data service to News Corp.’s 110 newspapers, film and television studios, and the Fox television networks.
Murdoch said in November that one of his first steps will be to eliminate fees for the online Journal, at a cost of $50 million a year, to increase readership and advertising. He has said he plans to increase coverage of general news, politics and the arts in the U.S. print edition to take on the New York Times, and will upgrade international editions that he called “a lot less than satisfactory.”
The Journal’s Web site may get enough ad sales to make up for the loss of subscription fees once it gets 20 times more readers, Murdoch said today in an interview on Fox News. Luring the 20 million readers may take a year, he said.
“We’re seeing in the world today, huge creation of wealth,” Murdoch said on Fox News. “There’s going to be a huge hunger for financial and business information.”