Thursday, December 13, 2007

Murdoch May Take Three Years to Profit From Dow Jones

Rupert Murdoch may take until the end of 2010 to show he was right to pay $5.2 billion for Dow Jones & Co., whose shareholders approved the takeover today.

By that time, Murdoch's News Corp. should be able to double Dow Jones's pretax cash flow to $600 million, giving it a 12 percent return on the purchase, said Larry Haverty, a fund manager at Rye, New York-based Gamco Investors Inc. Dow Jones may start adding to News Corp.'s profit in 2009 following investments next year, said Laura Martin, an analyst at Soleil Securities in San Marino, California.

``It's not a quick strategy,'' said Haverty, who helps manage Gamco's $30 billion in assets, including $308.1 million of News Corp. shares as of Sept. 30. ``Where he's going, we're very comfortable with it. It's just going to take three years.''

The purchase should be completed today shortly after the shareholder vote, News Corp. spokeswoman Teri Everett said before the results. She declined to comment further. Dow Jones investors with more than 60 percent of voting power approved the takeover.

Murdoch offered $60 a share, or 65 percent more than Dow Jones's stock price of $36.33 on April 30, to win over the Bancroft family that has controlled the New York-based company for more than 100 years. Until the Murdoch bid, the shares had dropped 53 percent from a high of $76.75 in June 2000.

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News Corp. Class A shares fell 15 cents to $20.65 at 11:50 a.m. in New York Stock Exchange composite trading. They had slipped 3.2 percent this year before today. Dow Jones advanced 1 cent to $59.98.

In addition to the Wall Street Journal, the purchase adds Barron's, Dow Jones Newswires and the Factiva data service to News Corp.'s 110 newspapers, film and television studios, and the Fox television networks.

Murdoch said in November that one of his first steps will be to eliminate fees for the online Journal, at a cost of $50 million a year, to increase readership and advertising. He has said he plans to increase coverage of general news, politics and the arts in the U.S. print edition to take on the New York Times and will upgrade international editions that he called ``a lot less than satisfactory.''

The biggest chances for growth will come from the Journal Web site and cable and satellite distribution of news outside the U.S., said UBS AG analyst Michael Morris, who recommends investors buy News Corp. shares and doesn't own them.

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