Why a Dow Jones purchase may not pay off for News Corp.

Eric Savitz of Barron’s writes on his Tech Trader Daily blog that Bear Stearns analyst Spencer Wang has crunched some numbers and concluded that a News Corp. purchase of Dow Jones & Co., the parent of The Wall Street Journal and Barron’s, may not work financially for the acquirer.

Savitz wrote, “Next, he looks at the concept of enhancing Dow Jones’ digital properties, but finds little synergy with MySpace; he comes to the fairly obvious conclusion that the average Myspace user is likely not a Wall Street Journal reader. That still leaves another $1 billion or so in synergies left to find – and he says the only place to find them would be in the yet-to-be-launched Fox Business News channel. Wang’s calculations put the value of that channel at $540 million, based on various assumptions on the affiliate fees the channel will receive at launch – he assume they will get half what CNBC now receives – and an estimated subscriber base to start of 30 million homes. He also assumes the channel will reach ad revenue per subscriber parity with CNBC in three years.

“The point is, to provide another $1 billion in synergies, the value of the channel would therefore have to triple to something like $1.5 billion. ‘While access to DJ’s financial content would give NWS’s Fox Business News channel a jumpstart in competing with CNBC, we would be surprising if the magnitude of the benefit is as large as the $1 billion figure we have calculated,’ he writes. ‘We also note that DJ has an exclusive content agreement with CNBC, which runs through 2012, theoretically limiting intermediate-term synergies.’

“One other factor to consider, which Wang notes in a table in the report on potential outcomes, but discusses only briefing in the text, is the sale of the Ottaway community newspapers, which he thinks could bring about $533 million if sold. That would cut the needed synergies from the television channel roughly in half.”

Read more here. I love the disclosure at the end.