An interesting wrinkle in the potential Murdoch/Bancroft deal

Posted by Ben Thalman on June 5, 2007 at 2:31 PM

There is an interesting wrinkle in the potential Murdoch/Bancroft deal, which involves the shares owned by the Bancrofts. According to the Herald Tribune there are more than 20 million Class B shares of Dow Jones & Co. - the kind that the Bancroft’s own - and about 63.7 million Class A shares - the kind traded on the New York Stock Exchange.

For each Class A share owned, holders get one vote, but for each Class B share owned, each holder gets 10 votes.

It becomes clear how the Bancrofts, owning about 82 percent of the Class B shares, or 16.4 million shares, can have the voting majority when there are over 83.7 million shares outstanding; their Class B shares give them a 10-to-1 ratio of leverage, or 164 million votes of the total 263.7 million, or a little over 62%.

The wrinkle occurs when Class B stock-owners sell their shares; Class B shares lose their 10-to-1 voting power when sold and become class A shares, with a 1-to-1 voting ratio.

Now it becomes important to note that the Ottaway family, who is strongly opposed to the deal, has 8%, or 1.6 million, Class B shares.

The Tribune also notes that, in theory, if all but 9.1 percent, or 7.6 million shares, of the class B stock were sold to Murdoch's News Corp., that remaining 9.1% would still, marginally, control the company through its 10-to-1 voting majority.

Of course it is doubtful that with so much at stake, Rupert Murdoch and News Corp. would have missed this detail. But it will surely be interesting to see how News Corp. will maneuver around this issue.

Source: International Herald Tribune through ifra Executive News Service