How the Bancrofts lost the Journal
TEXT OF INTERVIEW
Scott Jagow: One of the big stories of last week was Rupert Murdoch finally winning his bid for The Wall Street Journal. The way the story went was the Bancroft family was deeply divided over the sale. Then, at the last minute, a couple of Bancrofts skipped over to Murdoch’s side and the deal was done. But Fortune magazine’s Allan Sloan believes the Bancrofts actually lost the Journal a long time ago.
Allan Sloan: The Bancroft family sold tremendous amounts of stock over the years and what happened last week was the family had so badly set up the way it controlled the company, all you needed was a couple Bancrofts and that was it. So the Bancrofts tried to take control of the company about 20 years ago permanently and couldn’t even do it right.
Jagow: Well exactly what did they do wrong?
Sloan: OK the way to see what they did wrong is to compare what the Washington Post Company and the New York Times Company did right. In both of those companies, when they decided they wanted to have stock that traded in the public markets, they set up from the beginning two kinds of stock: There was family stock and then there was plebian stock for say people like you and me who are not part of the family. And the key there is you needed a solid majority of the family stock to take control of the company. However at Dow Jones what they did, the shares voted together for a majority of the board. If you got all of the public stock — and call it a quarter of the Bancroft stock — you’d have the whole company and that’s what happened. Rupert ended up with something like a third of the Bancroft stock and that was all he needed. I mean if I ever want my life controlled by a family I will not pick the Bancrofts.
Jagow: Now what kind of setup will Murdoch have with Dow Jones and The Wall Street Journal?
Sloan: Well News Corp, it used to be very tightly controlled by Murdoch’s family, but as it’s gotten bigger it’s gotten more and more shares and more and more different kinds of shares. But if you look at the family, you could see the family’s at war. There was a very nasty divorce, several of his grown children who may or may not be estranged from him. You could see down the road if there’s some falling out with the family, which I think is inevitable after Murdoch goes, that company could get sold too because the family would just settle its differences by selling.
Jagow: So same thing could happen to Murdoch that happened to the Bancroft family.
Sloan: Right. And with any luck I’ll even be around to write about it.
Jagow: I think we know where you stand on this on Allan. All right thanks a lot.
Sloan: You’re welcome Scott.
Jagow: Allan Sloan is a senior editor-at-large for Fortune magazine.
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