Warren Buffett's Conflict of Interest with Dow Jones (DJ, BRK/A, NWS, TOC, RTRSY)

Berkshire Hathaway (BRK/A-NYSE) has one serious impediment to getting involved in a buyout of Dow Jones (DJ-NYSE) as some speculate could happen at the right price.  Back on March 1, 2006 Berkshire Hathaway completed the acquisition of Business Wire.  Business Wire is perhaps the number one global press release distribution mechanism for major companies that report earnings, mergers, strategic alliance and the like.  It does compete with PR Newswire, Market Wire, Primezone and others, but most consider it the Rolls Royce of newswires and it is a Berkshire Hathaway portfolio company. 

Regulators of the past few years would probably overlook this as a non-event, but even a highly credible operator like Berkshire Hathaway might not want a conflict of interest this large.  Let’s forget about the Wall Street Journal and other holdings and look at the actual news terminal businesses that traders, brokers, newswire agencies, other media, and a portion of the public use for their direct news systems. 

If Berkshire Hathaway owned Dow Jones, how long would it take for an accusation to come out of Bloomberg, Reuters, Thomson, and others that the Business Wire press release feed was going straight to Dow Jones Newswires direct customers a bit faster than to redistribution partners? Not long at all.  Warren Buffett is probably well aware of this, but it has not been that well noted on other articles elsewhere.   What would happen if all of the other newswires out there were claiming that Marketwatch received superior speed and superior distribution capabilities over other free news sources from the Business Wire press release mechanism?  This would put the Reg. FD gatekeepers to a real test.  Buffett would have to make a  move he rarely makes: he’d have to sell a portfolio company (Business Wire), and in perhaps a record turnaround time.

Much of the public is not aware of the exact mechanisms and order behind public company news press releases, but an advantage of a few seconds and maybe even less time than that would drive subscribers to the faster service and away from the disadvantaged services.

There have been very recent reports that Ron Burkle has been approached to do a deal with the newspaper union to form a competing bid to News Corp. (NWS-NYSE) high premium deal.  There has also been reporting that Buffett acknowledged a potential but was unlikely to join the bidding, but that doesn’t keep speculators from stirring the water.  So as of now it’s up to the Bancrofts and the Murdochs and whoever else wants to try stepping in (if anyone).  The Dow Jones and News Corp. combination would likely not have much in the form of regulatory blockage, but there is a persistent question about how many employees would try to go elsewhere in a News Corp deal and what the direction of the news would go if it was a Murdoch & Co. unit.

Jon C. Ogg
June 5, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.