Dow Jones & Co. and News Corp. agreed broadly on measures to protect the editorial independence of The Wall Street Journal under ownership by Rupert Murdoch's media conglomerate, clearing away a major hurdle in the way of a deal, a person familiar with the matter said Tuesday.
Details of the agreement remained unclear, and any deal must still be approved by the full membership of Dow Jones' controlling shareholders, the Bancroft family, who initially rejected Murdoch's approach.
The family has since softened its opposition, but there appeared to be disagreements among the family's far-flung membership, which includes about three dozen adults in various parts of the United States.
The person, who asked not to be named because the agreement was not yet public, said News Corp. and Dow Jones have agreed in principle on ways to ensure the Journal's independence, with some items yet to be decided. Both Dow Jones and News Corp. declined to comment.
Dow Jones' board took over the discussions with News Corp. from the Bancrofts last week. The talks had been in slow gear for several weeks as the family worked on proposals for editorial safeguards at the Journal.
Dow Jones' board includes four representatives of the family, which altogether controls 64 per cent of Dow Jones' shareholder vote through a special class of privately held stock that has ten votes per share, versus one per share for Dow Jones' publicly traded stock.
Murdoch has offered US$5 billion or $60 a share for Dow Jones, a massive premium of about 65 per cent over the mid-$30s price that Dow Jones stock had been trading at prior to his offer becoming public. Many on Wall Street believe the price is too high to be matched by other bidders.
Dow Jones' shares rose $1.27, or 2.2 per cent, to end at $58.77.
So far no other serious bidders have emerged, meaning that Murdoch could clinch ownership of Dow Jones if he satisfies the concerns held by the board and the Bancroft family that the Journal remain free from corporate interference.
A union that represents Dow Jones employees as well as Jim Ottaway Jr., a former Dow Jones director who controls about five per cent of the company's shareholder vote, have said they're worried that the Journal's quality and independence would suffer under Murdoch, concerns that Murdoch say are not justified.
Murdoch has long wanted to own the Journal, which has tremendous clout in the business world and wins many prizes for editorial excellence. Murdoch has said he would invest in the Journal's online and overseas operations, and tap its resources to help build a business-themed cable news channel that would rival General Electric Co.'s highly profitable CNBC network.
Despite the Journal's prestige and influence in the business world, Dow Jones has lagged Reuters Group PLC and Bloomberg LP in providing real-time financial data and news to investors. In early May Reuters agreed to be acquired by Thomson Corp., another major financial information provider, creating an even larger rival in financial market information.
Besides the Journal, Dow Jones also owns Dow Jones Newswires, the Factiva news database, Barron's, a group of community newspapers and several well-known stock market indicators including the Dow Jones industrial average.
News Corp. owns the Fox broadcast network, Fox News Channel, newspapers in the United Kingdom, Murdoch's native Australia and the New York Post, the Twentieth Century Fox movie and TV studio and MySpace, the online social hangout site.
The Bancroft family has controlled Dow Jones for more than a century. Other newspaper publishers also have two classes of stock that allow families to retain control, including The New York Times Co. and The Washington Post Co., but in those two cases the families have greater involvement in day-to-day affairs.