OLD Media Moves

Dow Jones deal boosts Murdoch's ego, doesn't help investors

December 10, 2007

Posted by Chris Roush

Paul LaMonica, who writes the Media Biz blog on CNNMoney.com, argues Monday that the acquisition of Dow Jones & Co., the parent of The Wall Street Journal, by News Corp. CEO Rupert Murdoch is great for his ego, but doesn’t do a whole lot for his shareholders.

Rupert MurdochLaMonica wrote, “Sure, you can argue that there is limited risk to the deal since $5 billion is a relatively small chunk of change for a company with a $66 billion market capitalization. To that end, RBC analyst David Bank wrote in a recent report about News Corp. that the acquisition would financially be a ‘wash.’

“Bank wrote that the Dow Jones deal probably does make some strategic sense — he pointed out that the addition of the WSJ should be ‘a shot in the arm’ for Fox Business Channel. But he conceded that if News Corp. used the same amount of money that its spending on Dow Jones to buy back stock, the company could have increased earnings per share by about 5 cents next year, a move that probably would have pleased investors a lot more.

“And that’s my main point. When you get past the hype about how the Dow Jones deal makes Murdoch an even more influential player in the media business, the numbers just don’t justify this deal. Buying Dow Jones probably will boost Murdoch’s ego. But it probably won’t boost shareholder value for News Corp. investors anytime soon.”

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