Dow Jones deal even sweeter for the Bancrofts

Fortune’s Allan Sloan writes that the deal to sell Dow Jones & Co., the parent of The Wall Street Journal, to News Corp. CEO Rupert Murdoch is even sweeter for the Bancroft family than originally thought because of overlooked provisions of the deal.

Sloan wrote, “I’m interested in one little-noticed detail – the way selected Dow Jones shareholders will be able to defer taxes on their gains by getting $60 a share worth of News Corp. stock rather than cash.

“Although no one involved will say so on the record, it’s clear that the tax-deferral provision was designed to attract support from the Bancroft family. The Bancrofts, you may recall, collectively controlled more than 60% of Dow Jones’ voting power but didn’t vote as a bloc, which allowed Murdoch to pick up enough family support to seal the deal. On paper, the tax deferral is available to any Dow Jones holders that want it. But as we’ll see, if push comes to shove, the Bancrofts will get to do the pushing.”

Later, Sloan added, “I don’t know if Murdoch would have paid more than $60 a share if he hadn’t had to give the Bancrofts an extra $30 million or deal with the complexity and expense of setting up Ruby Newco. And I certainly don’t know how many regular Dow Jones holders (if any) will get pushed out of the tax-deferral pool by Bancrofts.

“What I do know, though, is that the Bancrofts, who in 1986 got permanent voting control by telling public holders that they’d treat their Dow Jones stake as a ‘quasi-public trust,’ have cut yet another special piece of the deal for themselves. I’m sure it’s all perfectly legal – but it sure doesn’t seem right.”

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