I’m trying to work out how the GE-Pearson deal for Dow Jones, being mooted
in both the WSJ
and the FT
today, could possibly work.
According to the WSJ, neither GE nor Pearson has much interest in injecting
much in the way of cash into the proposed joint venture. GE would instead contribute
CNBC, while Pearson would hand over the FT Group. Both of which are valuable
properties – but those valuable properties aren’t going to end up even
partially in the hands of Dow Jones shareholders, who will need cash to give
up their shares.
As a result, the new joint venture is going to have to borrow the best part
of $4 billion to pay DJ shareholders – and if today’s Dow Jones doesn’t
have enough income to cover the interest payments, then they’ll have to come
out of the profits of CNBC and the FT Group.
In other words, the deal would probably mean lower profits for both GE and
Pearson going forwards – a prospect which neither company is likely to
relish. To be sure, there’s an argument that the increase in value from owning
the Wall Street Journal and Dow Jones’s other assets would make up for the lower
profits. But GE and Pearson don’t generally think like that.
What’s more, the crucial question of editorial control over the WSJ would still
remain. If it remains a headless beast with no controlling shareholder with
the ability to execute a real vision, it will continue on its slow yet inexorable
decline. But that seems to be exactly
where the Bancrofts are headed.
In order for the deal to work, then, there would have to be a lot
of trust involved: the way I see it, both the Bancrofts and GE would have to
trust Pearson to run the Journal effectively, and allow Pearson to have real
control over the paper. That’s unlikely, not least because Pearson has never
really demonstrated its ability to run a newspaper. Rupert Murdoch has newsprint
in his veins. Pearson, not so much.