GE, Pearson Drop Out of Potential Bid for Dow Jones
General Electric and Pearson said they will not pursue a joint offer for publisher Dow Jones, removing a potential challenge to a $5-billion bid by Rupert Murdoch's News Corp.
GE , the world's second-largest company by market capitalization, and Pearson , publisher of the Financial Times, said they had held exploratory talks over combining their financial news outlets with Dow Jones, home to the Wall Street Journal. GE is the parent of CNBC.
"Following these discussions, GE and Pearson have decided not to pursue this combination," GE said in a statement. "Pearson and NBC Universal continue to discuss cooperative agreements between CNBC and the Financial Times Group."
Murdoch aims to compete with CNBC with a business news channel of his own, set to launch later this year.
A spokesman for the Bancroft family, which controls Dow Jones through its voting shares, had no immediate comment.
News Corp. declined comment.
Murdoch has bid $60 a share for Dow Jones, which has sought to encourage other potential suitors to make an offer.
No rival bids for the entire company have emerged, though MySpace co-founder Brad Greenspan has offered to buy a 25 percent stake.
“At this point, News Corp. is the only real bidder for Dow Jones,” CNBC's David Faber said. “The fact that the board of directors (of Dow Jones) has taken the lead and will be negotiating with News Corp. may make it more likely that News Corp. ultimately has a path to succeed here.”
Before GE pulled out, analysts were saying GE and Pearson wouldhave had to surmount major hurdles. Among them was combining the leading European and U.S. business news outlets with the top-rated U.S. business news cable network CNBC.
And while the idea of bolstering CNBC's already profitable business enticed some GE shareholders, it would have been tough to top the $60 per share bid from Murdoch, financial analysts said.
Not a Good Investment
"I don't know how you make it a good investment for GE," said Benchmark publishing industry analyst Ed Atorino. "Who puts up the money?"
GE and Pearson would have had to beat a News Corp. offer that values Dow Jones at 16.7 times projected 2007 earnings before interest, tax, depreciation and amortization, according to Citigroup Global Markets estimates. Prices for newspaper group deals have averaged about 10 times EBITDA.
Atorino said GE and Pearson also faced the risk of Murdoch boosting his already richly valued offer.
"This is not a financial transaction for News Corp.," Atorino added.
Bridging the management structures and styles of Pearson's Financial Times, GE's CNBC and Dow Jones' Wall Street Journal would have been no less of a challenge, media experts said. Although News Corp. would face hurdles in integrating Dow Jones, a three-way partnership would be that much trickier.
"If you look at who would be involved in a bid, you have the lawyers, the accountants, the advisers and you would multiply that by two," Numis Securities analyst Paul Richards said. "It doesn't just double the complexity ... it makes it very, very difficult indeed."
Media experts point to a history of uneasy media marriages, from Time Warner's disastrous merger with AOL in 2001 to Viacom Inc.'s separation from broadcaster CBS Corp. last year.
The three-way partnership would have created an odd menage, combining the loud, feisty CNBC stock picker Jim Cramer, the buttoned-down culture of the Wall Street Journal and the very British Financial Times, according to Tom Rosenstiel, director of the Project for Excellence in Journalism.
"One analogy I think of is, would a book by Tom Wolfe and John Updike be twice as good as a book by either one of them?" Rosenstiel said. "Or would it be some odd thing that would be less than the sum of its parts?"