Dow Jones says taking no action on News Corp bid

NEW YORK, May 3 (Reuters) Dow Jones&Co. decided on Wednesday to take no action on a 5 billion dollar takeover bid by Rupert Murdoch's News Corp. , saying the controlling shareholders, the Bancrofts, would veto a deal.

The decision could open up Dow Jones, publisher of the Wall Street Journal, to lawsuits from shareholders who were hoping to take advantage of Murdoch's highly priced offer, legal and governance experts say.

Dow Jones shares had soared nearly 55 per cent on Tuesday after the company said the board was evaluating the bid, which was priced at a 65 per cent market premium at 60 dollar per share.

But a representative of the Bancroft family told the board today that they would vote shares constituting about 52 per cent of voting power against the News Corp. bid, Dow Jones said.

''Approval of a merger under Delaware law requires approval of a majority of the outstanding voting power of the corporation.

Accordingly, the Dow Jones Board of Directors has determined to take no action with respect to the proposal,'' the company said.

News Corp. was not immediately available for comment.

The question now is whether Murdoch will raise his bid.

Buying Dow Jones would help round out his media empire by adding the influential Wall Street Journal ahead of his planned fourth-quarter launch of the Fox Business Channel.

Dow Jones could provide the new cable channel with real-time financial news from Dow Jones Newswires, a growing Internet presence, and analysis from Barron's.

''The ball's back in Rupert's court,'' said Benchmark Co.

analyst Ed Atorino, adding that Murdoch may raise his bid.

''I can't believe he's going to make one shot and just walk away,'' Atorino said.

Soleil Media Metrics analyst Laura Martin agreed.

''He has to raise the price, that would be my guess. I don't think Rupert's just going to give up and go away,'' she said.

If Murdoch fails to make another bid, and no comparable offers emerge, shareholders are likely to sue the board, or the Bancrofts, for failing to look after investors' interests, said legal experts.

Dow Jones is one of several large U.S. newspaper companies that are controlled by families, an ownership structure criticized by some analysts and investors as ineffective.

Corporate boards have a fiduciary duty to all shareholders to consider serious buyout bids, said Paul Lapides, director of the Corporate Governance Center at Kennesaw State University, earlier today.

Lapides said that while the Bancroft family members might not think Murdoch would be a good caretaker of the Wall Street Journal, that is not a strong enough argument for the company to make to shareholders interested in getting the best possible price for their shares.

''The board cannot just say no and walk away and expect that their shareholders are not going to force them to do something,'' he said. ''It is inconceivable to me that there will not be a major transaction regarding Dow Jones as a result of this offer.'' Thomas Dewey, a partner at law firm Dewey Pegno&Kramarsky, said, ''There is a substantial litigation risk.'' REUTERS PBB BST0600