12 May 2007


Ah, the too-muchness of it.

Yes, everybody has understood for some time that the data-and-news market (I hate the term "media") is crowded and low-margin. From this it follows -- and has followed -- that a wave of consolidation is nigh.

But it's nigh no more. It's now.

And the wave crashed in on the shore of Now on April 24, when shareholders for The New York Times withheld 42% of their votes on the question of the re-election of the directors. They knew the directors had a majority of the votes sewed up, and they had no alternative slate of directors to offer. But, led by Morgan Stanley, they wanted to register a protest.

And they did. Forty-two percent is huge under the circumstances. A similar protest led to the resignation of Michael Eisner as head of Disney not long ago.

What has gotten Morgan Stanley (and one of its execs, Hassan Elmasry, in particular) so ticked off about the controlling group of the NYT? Falling profits, a slumping share price, and the dual roles of Arthur Sulzberger Jr., who is both chairman and publisher.

What seems behind Elmasry's campaign for change at the NYT, though, is the expectation that if the company changed its stock structure, it would become attractive to buyers. Not just to people buying small blocks of shares to round out portfolios, but to buyers aiming at control and offering a premium. In short, though not quite explicitly, Morgan Stanley wants the NYT to put itself up for sale.

The Times has so far successfully resisted, and Sulzberger has kept both jobs. Still ... the withheld votes served as a signal to the market.

Then on May 1, the Dow Jones (which publishes the Wall Street Journal) announced that Rupert Murdoch's vehicle, News Corp., had made an unsolicited bid to buy it at $60 a share. That's about $20 more than the level at which the stock was trading before the news.

The controlling group in this case is the Bancroft family, which owns 62% of the stock. If the Bancroft family holds firm, then, Murdoch can't buy a controlling share. It is by no means certain that they will hold firm, although so far (two weeks later) they seem to be.

But the logic of consolidation remains powerful and the offers will keep coming until somebody starts selling. On May 8, Thomson Corporation, a publishing company that provides data, software, etc. to lawyers, accountants, tax consultants, etc. -- and that has its operational headquarters in Fairfield County, Conn., offered to buy the London-based Reuters Group for 8.77 billion pounds (US $17.5 billion). If the combination goes through it could create the world's largest financial news and data concern.

Reuters' management is making nice. It appears that Thomson and Reuters will strike some sort of deal, pending review by several sets of regulatory/antitrust authorities on both sides of the Atlantic. Regulators likely won't just stand in front of this train yelling "stop!" At most, they'll demand some divestitures that will make the resultant combined company somewhat less huge than otherwise. But the wave of consolidation is upon us, and with this third offer in a few days, the sand castles on the shore have started dissolving.

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Knowledge is warranted belief -- it is the body of belief that we build up because, while living in this world, we've developed good reasons for believing it. What we know, then, is what works -- and it is, necessarily, what has worked for us, each of us individually, as a first approximation. For my other blog, on the struggles for control in the corporate suites, see www.proxypartisans.blogspot.com.