Rupert's Prowling Again

With Tribune (NYSE:TRB) clearly going to Zell, we all thought the media sector would calm down, at least for a while. How wrong we were.

As you probably know by now, it's now come to light that media mogul and News Corp. (NYSE:NWS) CEO Rupert Murdoch is hunting again. This time he's made a surprise offer for Dow Jones (NYSE:DJ), which, among other things, is the publisher of The Wall Street Journal. The News Corp. offer reportedly is for $60 a share, or a more than 65% premium above the company's trading level before it was disclosed. As is the case initially with most proposed transactions of this type, there still are more questions than answers about both the offer and the likely reaction to it.

Nevertheless, it's been reported that the Bancroft family -- which owns 27% of Dow Jones shares, but controls 64.2% of the company's voting power through its supervoting shares, and thus could squelch any deal -- is opposed to a News Corp. takeover of their company. The family reportedly was informed of the offer in mid-April.

The amount of the premium represented by the offer is surprising, given that newspaper publisher and television operator Tribune had difficulty generating widespread interest during the six months it was on the market before its board accepted a restructuring proposal from Chicago real estate investor Sam Zell. But as Murdoch apparently has indicated, he considers financial journalism to be an exception to the malaise characterizing most of the newspaper industry.

With a daily circulation of more than 2 million, the Journal is the nation's largest financial publication and ranks second in circulation to Gannett's (NYSE:GCI) USA Today among all daily newspapers. For its part, News Corp. already owns the Fox movie studio and TV networks, the MySpace website, a number of television stations, and a host of newspapers. Its New York Post paper is one of the very few metropolitan dailies to add subscribers of late. The Fox financial network that Murdoch plans to start later this year to compete with General Electric's (NYSE:GE) CNBC clearly would benefit from an affiliation with the Journal.

Here's how I come out on this situation at this time, Fools: First, as an aficionado of financial news, I hope that, however the quest for Dow Jones shakes out, the tremendous editorial quality of the Journal remains unscathed. But as an investor, I'll stay on the sidelines, and hope that you'll do the same. With Dow Jones' stock trading at less than 10% below Murdoch's offering price, the upside is far smaller than the downside that would be realized if the Bancrofts declare that they are unalterably opposed to any sale of the company.

For related Foolishness:

• Fool on the Street: How Now, Dow Jones?
• Dow Jones Thinks Inside the Box
• News Corp.'s Newsworthy Quarter

Fool contributor David Lee Smith is a voracious reader of The Wall Street Journal, but does not own shares of any of the companies mentioned. He welcomes your questions or comments. The Fool has a disclosure policy.