The Man Who Owns the News (21 page)

Two dinners are taking place in Manhattan, blocks from each other. The first involves Murdoch and two Melbourne colleagues. The second, members of the Bancroft family.

That afternoon the News Corp. board met and approved Murdoch’s outsized bid for Dow Jones. The board—all men, partly because Murdoch believes that women talk too much—may not be the most docile in corporate America, but it is certainly among the most reverential. Outside directors are supposed to be of a stature to judge and monitor and take to task a company’s senior management. The News Corp. board, a collection of successful but hardly exceptional businessmen, has the added hurdle of having to assume equipoise with Rupert Murdoch. They do not pretend to try. In the instance of Dow Jones, an acquisition that might reasonably have raised many doubts, if not objections, was greeted with a rather giddy sense of adventure. The question was not should they but could they—it was not the logic of it but the challenge that was compelling. Having unanimously approved the deal, a letter was forthwith delivered to Peter McPherson, who will the next day, April 18, assume the chairmanship of the board of Dow Jones.

That evening, in celebration, Murdoch goes to dinner with Melburnian Sir Rod Eddington, a genial and avuncular former airline executive who ran both British Airways and Ansett, an Australian airline that News Corp. acquired a controlling stake in; Murdoch put Sir Rod on the News board in 1999. The other Melbourne bloke joining them is Robert Thomson, who has been in constant contact with Murdoch about the deal, virtually commuting back and forth between the London
Times
newsroom in Wapping and News Corp. HQ on Sixth Avenue in New York. They go to Milos, a Greek restaurant on 55th Street near Sixth—where Murdoch can get a plain grilled piece of fish.

They are all pleased with themselves, on tenterhooks about what’s to come, and almost stagily careful about what they are saying, or how they are saying it, out in public. This is easy for Thomson, who is almost pathologically cryptic, and next to impossible for Eddington, who never seems to stop talking.

Eddington, who has known Murdoch now for more than twenty years, is actually worried about what Murdoch might be facing. Rupert has been amusing them with the latest details he’s learned from Steginsky about the Bancrofts. Many members of the family, even those not particularly inclined to side with Murdoch, are turning out to be their own best and meanest chroniclers, telling Steginsky on a blow-by-blow basis who’s firm and who’s crumbling, who’s on the wagon or off, who’s taking their meds and who isn’t.

It sounds to Eddington as if this might quickly get pretty messy and bogged down.

“You need to show two things in this deal—a lot of charm and a lot of patience,” says Eddington. “And you only have one. I’m not saying you’re not charming.”

Impatience is one of Murdoch’s key character notes—an attribute that appears in countless situations, one responsible for so many abrupt turns of conversation or of the state of play, the characteristic that may have resulted in his reputation in some quarters for being antisocial. He fidgets, his eyes wander, his fingers tap, and then he forces the issue—peremptorily, often rudely, sometimes brutally.

And yet here they are in such a delicate deal.

Family deals are the dogged low end of the mergers and acquisitions business. The high end of M&A is when great public companies agree to be combined or to be acquired, or reverse-merged, or restructured, or to have significant divisions rolled out or rolled up. This is finance, with intricate and original logic and symmetries—the business of bankers, lawyers, and principals. It is what is called in the M&A trade “a process,” that is, something orderly, routinized, fungible, knowable, predictable. This represents the great sense and sensibility of capitalism—the great accomplishment. The administration and accumulation of wealth, so the thinking goes, has largely left the hands of parochial, narrowly focused entrepreneurs and uninformed, emotionally addled families and has been placed in the hands of professionals—masters of business administration.

Nobody wants to be a hand-holder, a cajoler—nobody wants to do the widows-and-orphans thing. Nobody wants to get down in the primal muck of a family and its inheritance.

Except, actually, Rupert.

A secret (one of them) of Murdoch’s success, the grease of his career, is his ability to deal with, and prevail in, highly personal, profoundly emotional transactions in which the stakes are not just financial but deeply related to ego, turf, and family. This impatient man has an extraordinary tolerance for the ambivalence of nonrational players—and a keen eye for their weaknesses.

While the Melbourne boys are on West 55th Street, various members of the Bancroft family are sitting down to dinner around the corner on West 52nd Street at the “21” Club. For years, members of the Bancroft family have gathered for dinner on the night before the Dow Jones annual meeting.

Now they are faced with an offer to buy the company at almost twice its current value. But in the nineteen days since Murdoch told Rich Zannino over breakfast that he wants to buy the company, and Rich Zannino and general counsel Joe Stern called Michael Elefante to see how the family would react to such an offer—understanding that the family’s ability to react was highly time-sensitive—no one has told the family.

The family board members—Chris Bancroft, Leslie Hill, and Lisa Steele—have been told, but they have been rather threatened with all manner of insider-trading violations should they tell their relatives.

Rich Zannino joins the Bancrofts for dinner at the “21” Club and gives a little talk. On the eve of Dow Jones’ most momentous annual meeting, the CEO talks to the company’s principal owners about…the Red Sox. Recall that in 1982, the Bancroft family’s seventy-three-year-old matriarch, Jessie Bancroft Cox, at a one-hundredth-anniversary party for Dow Jones—also held at the “21” Club—said, “What the hell’s the matter with my Red Sox?” and keeled over dead. Ever after this—and Zannino has been so informed—the Boston Red Sox have been the subject of choice when management speaks to the Bancrofts (disregarding the fact that few of them live in Boston anymore).

After Zannino gives his little talk about the Red Sox, it is Peter McPherson’s turn. McPherson is about to become the chairman of the board of Dow Jones, and this is one of his first introductions to the family as a whole. It is good—and calculated—Murdoch timing: Put the offer in the hands of a brand-new chairman. McPherson, sixty-six, is a blustery, portly, academic administrator. He got the chairmanship because the logical candidates, Irv Hockaday and Harvey Golub, were either too old or unwilling.

Hence, the mustachioed McPherson, fond of chewing on an unlit cigar, is greeted with a skeptical “Who’s he?” by the Bancrofts.

McPherson, faced with having to deal immediately with the most significant event in the history of this century-old company on the first day of his chairmanship, speaks to the controlling shareholders about…binge drinking on college campuses.

1977:
HIS DEALS

Among the reasons Murdoch will achieve a business status at times rather close to that of, say, Jay Gould or Michael Milken or the chiefs of Enron, is that his deals so often seem so unfair. It defies logic how he gets what he’s gotten, so therefore he must have tricked people into giving him what he has. His dealcraft isn’t blue-chip dealcraft.

Most major corporations hire big investment banks and brand-name law firms and top management consulting firms in order to create a great, diffuse decision-making consensus. What’s done is done with someone else’s approval. Everybody gets ample ass coverage. That’s the point: Whatever decision is made, whatever transaction occurs, whatever destabilization of a company, an industry, and/or the entire economy results, it’s the product of a consensus of the most respected business mandarins in the land. Everybody has done what they’ve done acting on the advice of someone else. There are rules and conventions that are followed. Ritual and propriety are obsessively observed.

Over the years, News Corp. will largely, if begrudgingly, come to follow these rules and conventions. Peter Chernin will prove to be as process-oriented an executive as you’re likely to find in the media business. Murdoch mostly goes along with this, albeit grumpily. But even thirty years later, he will still see himself as the alien, which in the beginning he is, the man without roots in the community, which in the beginning he doesn’t have, the usurper, who has not paid his dues.

When Murdoch moved his family to New York in 1974—when business protocols were still largely straitlaced and blue-suit—his intention was to make acquisitions in the United States. The first step in that process would be to buy yourself business legitimacy by hiring the biggest law firm and the most prestigious investment bank that would have you.

The fact that Murdoch doesn’t go this route means:

He’s simply too small-time to be of any interest to the big boys.

He doesn’t even aspire to the big leagues—he’s looking at two-bit deals that wouldn’t be of any interest to powerful businessmen. He has, in other words, no illusions about his status.

He doesn’t care; in fact, he has an entirely different, whether instinctive or strategic, conception of how he means to work, and who can work with him.

He has problems with authority.

The media business in the early seventies isn’t considered to be particularly respectable on military-industrial-complex-biased Wall Street, so Wall Street wouldn’t want him anyway.

Likely it is all of these things.

Commencing his American initiative, Murdoch hires himself a twelve-man local New York law firm with virtually no experience in the field of mergers and acquisitions. The firm is called Squadron, Ellenoff, Plesent, and Lehrer. Like a thousand other little firms in the city, it handles minor litigation, trust and estate matters, and other small-time commercial transactions. It’s as different from the major business firms—Paul, Weiss, Rifkind, Wharton, and Garrison, the firm of the Kennedys; Milbank, Tweed, Hadley and McCloy, the firm of the Rockefellers; Cravath, Swaine, and Moore, the firm of IBM; Lord, Day, and Lord, the firm of the
New York Times;
Weil, Gotschal, and Manges, the firm of General Motors—as Australia is from the United States.

Howard Squadron, the senior partner, is a minor politico in the city. He has no stature in the business world, has done no deals of the kind that Murdoch will shortly be doing. Murdoch met him in conjunction with a book publisher he owns in Australia and some matter involving the distribution in the United States of a line of astrology titles. Years later, when biographers look at Murdoch’s beginnings in New York, they will cast Squadron as a legal power broker. But his eminence will derive entirely from Murdoch. Murdoch, as he did with Commonwealth Bank in Australia, will quickly come to dominate the firm. It will have no other real allegiances. (In 1990, when News Corp. will merge its Sky satellite network in the United Kingdom with British Satellite Broadcasting, Goldman Sachs, its banker on the deal, will be required by News Corp. to use the Squadron firm to do significant aspects of the legal work. Goldman will decide the firm is not up to the job and assemble a “shadow” legal team to redo the work of the Squadron attorneys.)

And then Murdoch hires Allen and Company. Hiring Allen and Company as your investment bank not only does not give you blue-chip status, it says you are the opposite. It sends up a red flag. Started in the 1930s, it’s a firm that, up until the media becomes a blue-chip industry, is entirely outside of the business establishment.

When Murdoch comes along in 1976 and hires Allen and Company’s Stan Shuman, he is hardly hiring a firm—he’s just hiring a guy with a briefcase.

Murdoch isn’t going to be dominated by mandarins and experts, nor by standard practices—he isn’t going to be high-handed by somebody more authoritative and more respectable than he. Murdoch does not like people with big egos, as Arthur Siskind—the corporate partner at Squadron, Ellenoff who handles much of the day-to-day News Corp. work and who, in 1991, will join News Corp. as its general counsel—comes to appreciate. He isn’t about to give up any aspect of control.

Murdoch’s first two deals in New York, with Dorothy (Dolly) Schiff of the
New York Post
and Clay Felker of
New York
magazine—both of which shock the city, both of which seem to occur in the dead of night—are about his charms and skillful manipulations.

One secret of Murdoch’s seemingly underhanded deals, and his sudden materialization as a player and contender, is the courtship. Where other businessmen run the numbers, Murdoch deals with personalities. Against the best advice on the game, he plays the man, not the ball.

The man he courts and plays most adroitly, and who becomes the agent (willing and unwilling) for his first dramatic acquisition in New York, is
New York
magazine editor and publisher Clay Felker. In the anti-Murdoch mythology, the two men now represent the extremes of the media business—one the honest creator, the other the cynical acquirer. In fact, Murdoch’s advantage is to realize how much they are alike.

The age of the media operator has begun—media guys who leverage the profiles and reputations they gain from buying media properties to buy other media properties.

Murdoch immediately sees Felker as a contrast to the other key player he’s met and courted in New York: Edward Downe Jr., the owner of Downe Communications. In the early 1970s, Downe, a society figure who will later marry the socialite Charlotte Ford and be convicted of insider trading and tax evasion, owns the largest magazine publisher in the U.S. Its flagship title is the
Ladies’ Home Journal
. He owns, too, cable TV systems, radio stations, direct mail, and magazine subscription fulfillment companies. It’s an odd sort of precursor to the future Murdoch empire—except that Downe, unlike Murdoch and Felker, does not see himself as the brand. He’s just a guy who’s invested in a bunch of stuff.