Inside the Murdoch-Dow Jones Courtship

William Cox Jr.'s heart began to fail him early this spring as he was waiting for a flight at JFK International Airport. At 76, Cox is a respected member of the Bancroft family, which controls Dow Jones & Co., publisher of The Wall Street Journal. Known as Big Bill, Cox was the unusual family member who had made a career at the Journal, helping to launch The Wall Street Journal Europe. Although three generations of his relatives have squabbled in the past over the future of Dow Jones, they were largely united in their fondness for Big Bill. And they knew he would do anything in his power to keep the Journal independent.

But even as Big Bill was convalescing at his Hobe Sound, Fla., mansion in April, another heart-stopping event in the family's history was taking place. Rupert Murdoch, also 76 and the patriarch of his own media empire, had long coveted the Bancrofts' prestigious newspaper. And so Murdoch made his move, quietly offering $5 billion for Dow Jones. The "timing was pretty unfortunate," said a former Bancroft family adviser, who requested anonymity because he isn't authorized to publicly discuss family matters. "This really closed the family's ranks out of respect for Big Bill."

For two weeks, the Dow Jones board and its controlling shareholders mulled Murdoch's offer. They met with investment bankers and heard presentations from Dow Jones management. But the board soon announced that it would take no action on Murdoch's bid. The reason? Bancroft family members controlling 52 percent of the company's voting power opposed it. In another era, that might have been the end of the tale. The heirs of Clarence Barron, who bought a controlling interest in Dow Jones for $130,000 in 1902, would thumb their noses at a rival media dynasty.

But upon reflection, familial sympathy for Big Bill, whose condition is now stable, seems to have given way to colder calculations. Murdoch's offer was a rich one. At $60 per share, it was 67 percent more than the stock was trading at before the offer. In the 79 years since Barron died, leaving his son-in-law Hugh Bancroft to run the company, both the family and the media business have been transformed. Although three members of the clan sit on the Dow Jones board, Barron's heirs (all by marriage; he had no biological children) play little role in the management of the company. And growing numbers of the family's far-flung members are no longer content with collecting hefty annual dividends.

Perhaps doubts had crept in about the viability of an independent newspaper company in a world where both readers and advertisers have migrated to the Web—or disappeared altogether. Days after the Murdoch bid, Thomson Corp. said it was buying the news service Reuters, increasing the competition to the Dow Jones Newswires. Even Dow Jones CEO Richard Zannino recently told the board he did not believe he could get the company's stock up to $60 in the near future.

The Bancrofts' resolve gradually crumbled over the past few weeks. Last Thursday, the clan said it would meet with Murdoch to discuss his offer. The family announced that while it still wished to preserve the editorial independence and integrity of The Wall Street Journal, those goals "may be better accomplished in combination or collaboration with another organization, which may include News Corporation." The family also declared its "receptivity to other options," prompting speculation about other bidders, ranging from Bloomberg and GE to private-equity funds. With an eight-paragraph statement, the family effectively hung a FOR SALE sign on the front of its headquarters in New York's World Financial Center. The Bancrofts said they couldn't predict the outcome of the bidding, and added that they may ultimately decide not to sell. Still, the family's decision to meet with Murdoch is a coup for the mogul.

When the meeting takes place it will mark the collision of two great family empires—one created at the dawn of the 20th century, the other built for the 21st century. The differences between the two clans are stark. Murdoch began with a newspaper in Australia; the Bancrofts hailed from New England. Their approaches to journalism are also oceans apart. The Bancrofts' aloofness from the company's day-to-day management is legendary. This laissez-faire approach represented their philosophy toward journalism. They view The Wall Street Journal as a sacred trust whose independence and integrity must be safeguarded.

Rupert, the undisputed patriarch of the Murdoch dynasty, has almost singlehandedly built News Corp. into the world's most powerful media company. Yet for all his success, journalistic respectability has eluded him. He's dogged by a reputation of practicing self-interested and biased journalism that has made him a pariah in many sectors of the media establishment. Critics often fault his Fox News Channel—the No. 1 cable channel—for putting a conservative spin on the news. His New York Post is known for such page-one features as a recent photo of Lindsay Lohan, passed out after a night of hard partying. (It can be difficult, however, to find a member of the New York chattering classes who does not read the Post.)

For all their differences, there are striking parallels between the two families. Dow Jones and News Corp. are publicly held companies, yet both families have embraced the idea of controlling their media enterprises as a birthright. Murdoch recently dramatically reconfigured News Corp.'s vast U.S. holdings to rid the company of a powerful investor, John Malone, who threatened his control. A Bancroft family maxim: never sell Grandpa's paper.

The similarities between founders Murdoch and Clarence Barron run even deeper. Born in different centuries and under different economic circumstances, both were nevertheless self-made men, passionately dedicated to journalism and driven to succeed financially. Both were outsiders to the media elite of their day. They each embraced the new technologies—the telegraph for Barron, digital convergence for Murdoch—to change the way information was distributed.

Like a Horatio Alger fable come to life, Clarence Barron, born in 1855, came from nothing. His teamster father drove horses around the Boston waterfront. Clarence's pregnant mother had to move in with acquaintances because the family home was too small to hold another child. One of those acquaintances taught young Clarence to read and instilled in him a love of learning. Barron quickly found his calling in journalism, and soon saw the rise of industrialization as the biggest story of his day. Barron eventually moved into a boarding house run by Jessie Waldron, a widow with two daughters. As his prosperity grew, so did his girth—at 5 feet 5 inches he weighed 330 pounds, and required a leather harness to keep his belly in check, according to a privately published history of the company's early days, company archives and standard histories of Dow Jones. Soon Barron launched his own business, and forged a partnership with a fledging Dow Jones news service, distributing hourly bulletins that covered financial news in Boston and New York. In 1900, Barron married the widow Waldron. A few years later, he borrowed money from his new wife to buy Dow Jones and its flagship property, The Wall Street Journal. Barron soon owned both a mansion on Boston's Beacon Street and a waterfront estate called The Oaks in Cohasset, Mass.

One of Jessie Waldron's daughters, Jane, would eventually inherit their Dow Jones shares. She married Hugh Bancroft, a Boston lawyer from a prestigious family who became head of Dow Jones after Barron died in his sleep in 1928 at the Kellogg Spa, where he'd gone to battle his weight (his last words were "What's the news? Are there any messages?"). A brilliant lawyer and engineer, Bancroft apparently suffered from depression. After the financial turmoil of the Great Depression, Bancroft checked out a book from the Boston Public Library on poison gases; he bought ingredients at various stores around the city. In 1933, he locked himself in a shed, made the gas and killed himself. Before he died, though, he established trusts that locked in control of Dow Jones for his and Jane's children and grandchildren. After Hugh's funeral in Cohasset, Jane pulled aside the manager of Dow Jones and told him, "I want you to do what's best for the company. Don't you and the boys worry about the dividends."

That exchange was one of the last times a Bancroft descendant played a management role. If Barron invented business journalism, Barney Kilgore modernized it. Appointed editor in 1941 and Dow Jones CEO a few years later, Kilgore broadened its coverage beyond the markets and Corporate America and began exploiting publishing technology to expand the newspaper nationally. Although Kilgore died in 1967, his tenure was the beginning of a boom period that extended well into the 1980s. By the late 1990s, with the company's stock price languishing, some of the younger generations were growing restive. Lizzie Goth Chelberg, a great-granddaughter of Jane Bancroft, and her cousin Billy Cox went public with complaints about the performance of the company and their stock holdings. The move created a furor within the family.

Unlike Barron's, young Rupert Murdoch's family was relatively well off. His grandfather was a pillar of the Free Church of Scotland, according to "Murdoch," by William Shawcross, who speculates that Rupert may have inherited some of his deep distaste for the English establishment and its traditions from the Very Rev. Patrick John Murdoch. In 1884, the senior Murdoch left Scotland for the Free Church in Melbourne, Australia. Patrick and his wife, Annie, had seven children. Keith, Rupert's father, was born in 1885. In 1912 Keith joined the Sydney Sun as a correspondent and later gained fame as a war correspondent on the beaches of Gallipoli. In 1928 he married Elisabeth Greene; they had four children. Rupert (christened Keith Rupert) was born in 1931.

Within a decade Keith had become editor of the Melbourne Herald. Shawcross reports that a few months after Keith took the job, a young girl was found naked, raped and murdered. The Herald went all out with its coverage—"big headlines, blatant innuendo, even a reward for information leading to a conviction." Circulation skyrocketed. In the 1930s, Keith's power grew as he expanded the Herald; he was ultimately knighted. By the time he died in 1952, he had acquired the Adelaide News. In his will, Sir Keith said, "I desire that my said son, Keith Rupert Murdoch, should have the great opportunity of spending a useful altruistic and full life" in newspaper and broadcast journalism. After inheriting the News, Rupert spent the next several years acquiring, launching and investing in newspaper and broadcasting properties in Australia. He continued his national expansion during the next 30 years, but he also set his sights on the U.K. and the U.S. In England, he picked up the News of the World, The Sun, The Times, The Sunday Times. Moving into the United States in 1973, Murdoch added the San Antonio Express and News to his portfolio. Next came the New York Post, New York Magazine and the Village Voice. (He has since sold New York and the Voice.)

But Murdoch had even bolder plans—the launch of a fourth broadcast network to challenged the Big Three (ABC, CBS and NBC). He moved methodically, first buying Twentieth Century Fox Films. In a move that underscored his ambition, Murdoch acquired television stations in seven big-city markets. The two acquisitions were the launch pad for his now enormously successful Fox network. But Murdoch still wasn't done. Satellite television and book publishing were also in his sights.

Meanwhile, the Bancrofts' strategy of letting journalists run the company had begun to backfire. In 2000, after the stock of Dow Jones climbed to a historic high of $77, the tech bubble burst and the stock market crashed. The Internet had begun supplanting traditional media. Across the publishing industry, newspaper and magazine circulation and advertising plunged. It was the beginning of the end for the journalist-as-CEO model at Dow Jones. Since he arrived in 2001, Richard Zannino, now CEO, had begun to successfully move the company into the digital age. He acquired Factiva, a database of business information, and pushed the integration of The Wall Street Journal's print operations and its Web site, boosting paid subscriptions to the company's Internet site and significantly reducing Dow Jones's dependence on print advertising. Even with those encouraging moves, however, the company's stock hovered in the mid-$30s.

In late March, Murdoch invited Zannino to a breakfast meeting. They chatted about industry developments. As the session was nearing an end, Murdoch said he was interested in buying Dow Jones. Zannino told him the Bancrofts weren't interested in selling. Murdoch was undaunted, and is now a step closer to acquiring one of the most fabled institutions in the nation's commercial life. It's the kind of story Clarence Barron would have loved.