Provision in Dow Jones charter could allow for lower bid

Floyd Norris, the chief financial correspondent at the New York Times, writes that there is a provision in the Dow Jones & Co. charter that would allow the company to accept a bid lower than the $60 per share being offered by News Corp. CEO Rupert Murdoch for the parent of The Wall Street Journal.

Norris wrote, “But Dow Jones has an unusal provision in its corporate charter:

‘The board of directors of the corporation, when evaluating any actions or transactions described in paragraph a of Article Seventh of this certificate of incorporation, shall give due consideration to all relevant factors, including without limitation the effect of such action or transaction upon the independence and integrity of the corporation’s publications and services and the social and economic effects of such action or transaction upon the corporation’s stockholders, employees, subscribers, readers, advertisers, customers, suppliers and other constituencies, and on the communities in which the corporation and its subsidiaries operate or are located.’

“That would seem to allow the board to agree to take less if it thought that would preserve ‘the independence and integrity’ of The Wall Street Journal. The bulk of shareholders would disagree, of course, but if the board voted to approve a deal with Pearson and G.E. in return for, say, $55 a share in cash or stock, and the Bancroft family said it would not take any price from Mr. Murdoch, who has offered $60, public shareholders might go along and the courts might agree.

“The Bancrofts control the super-voting shares but cannot sell control of the company, because the shares lose their super-voting privileges if sold. They have been trying to come up with a deal to let Mr. Murdoch buy the company without having real control of the journalism. It is hard to imagine him agreeing to any such proposition that did not have a loophole, so the Bancrofts could yet face a decision on whether to take less, assuming somebody makes an offer, or turn over the Journal to Mr. Murdoch.”

Read more here. A subscription is required.