If you had been a shareholder of Dow Jones, what tradeoffs would you have considered when deciding whether to take the $60 per share or the shares of Ruby Newco?
If I had been a shareholder of Dow Jones at the time of their acquisition, I’d opt for the $60 per share in stock. According to McIntyre (2007), Dow Jones stock made no progress from 2004 to early 2007 and by the end of 2004, the shares traded around the $40 mark with last month shares being in the $34 to $35 range. So with News Corp offering $60 a share, made the deal a little more attractive. At a full 50 percent above the stock’s 52 week high, the $60 a share represented a huge premium for Dow Jones (Faber 5May2007). As conditions at Dow Jones got worse in 2003, income from continuing operations, which had been $184 million in 2002, fell to $83 million in 2004. The company’s share price dropped from $57 in mid-2002 to under $30 at the end of the year. Therefore, from a valuation perspective News Corp offer is to difficult to ignore let alone turn down.
Discuss the differences in merger practices between U.S. companies and companies in other countries. What changes are occurring in international merger activity, particularly in Western Europe and Japan?
The difference in merger practices between U.S. companies ; companies in other countries is, mergers by form of hostile takeovers or any form of takeovers, is virtually nonexistent or uncommon (Gitman ; Zutter 2012). The U.S.’s emphasis on shareholder value and relying on public capital markets for financing are also a few practices generally not shared by companies in continental Europe. Gitman ; Zutter (2012) also state that the U.S. approach isn’t the norm in Japan and other Asian nations either. “Both European and Japanese companies have been active as acquirers of U.S. companies in recent years” (Gitman ; Zutter 2012 pg.736). Historically the British have been the most active acquirers of U.S. firms, with Japan hot in their trails in the late ‘80’s thanks to their acquisitions of Sony ; MCA. Most recently, the Germans have been active acquirers and Australia, home country to News Corp,
as well with its most recent merger with Dow Jones (Gitman ; Zutter 2012). Foreign companies will continue to acquire U.S. firms for year to come so they may continue to acquire world class technology and gain access to the single largest, richest, and least regulated market.