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.
Downe, who, like Felker, sees Murdoch as an easy mark, is trying to lure Murdoch to become an investor in his business. But Murdoch doesn’t especially like Downe—he finds him a disengaged, lazy, snobbish figure. What’s more, he can’t afford a meaningful stake in Downe’s company—and he isn’t, if he can help it, a noncontrolling investor. And he really wants a newspaper.
In 1973, not long after he buys the San Antonio papers (there are afternoon and morning papers, which he merges into one), Murdoch meets Felker at a dinner party Kay Graham of the Washington Post throws for him. Graham is Murdoch’s one substantial contact in the newspaper business in the United States. Graham’s father, Eugene Meyer, knew his father. When Rupert was younger, they socialized in each other’s countries as visiting newspaper royalty. Murdoch, not long after he settled in the United States, began to fantasize about buying the Washington Post. Or, with only slightly less grandiosity, he considered competing with the Post, eyeing the Washington Star. Washington would be a suitable base for him. That would give him liftoff. But he hesitated. It was an unusual moment of sentiment, his decision not to compete with Graham, or an unusual moment of caution and fear. He judged her a scary competitor. What’s more, he couldn’t remotely afford the Star—although he never strictly aligned his plans with his bank account.
Sentiment will not save Clay Felker (though thirty years after he buys Felker’s company and cuts short Felker’s meteoric rise in the media business, Murdoch will voice brief regret about losing the friendship).
Like Murdoch, Felker is an outsider in New York. He’s a midwesterner, from Missouri. His relationship to the New York establishment is to hustle it and to thrive in spite of it—or on a parallel track to it. In New York magazine, he perceives that the city’s establishment is on the verge of transition and that his magazine could become the old establishment’s rival.
Felker, the city’s most successful media upstart, is a sort of New York Svengali—in the pages of the magazine and in the emerging new social scene in New York, he’s creating a set of personalities and defining new centers of power to compete with the old.
He is, in this, a perfect if unwitting tutor for Murdoch.
At Felker’s suggestion, in the summer of 1974, Murdoch takes a house in East Hampton, just through the hedges from Felker’s own house.
Felker spends a good part of the summer monologizing Murdoch about the New York media scene—who’s up, who’s down, who’s going after whom. It is partly through Felker’s example that Murdoch figures out the dangers of a summer house in East Hampton, Manhattan’s media enclave by the beach—it’s too exposed, the conversation too uncontrolled, the gossip too unguarded. Wounding Felker, Murdoch buys a house in upstate New York, a farm in Old Chatham. But Felker is working Murdoch (at least he believes he is the one doing the working, rather than the reverse). Felker sees Murdoch as his discovery. Many of Murdoch’s initial acquaintances and introductions in New York are through Felker.
Felker suggests what schools the Murdoch children should attend. Murdoch’s daughter Elisabeth, age six, enrolls at the Nightingale-Bamford School on the Upper East Side, then a year later switches, trading up to The Brearley School on East 83rd Street. His daughter Prudence and son Lachlan enter Dalton, on East 91st Street.
There isn’t any more distilled collection of the ambitious, the determined, the wealthy in Manhattan than at a handful of schools mostly on the Upper East Side. The parent body is some ideal combination of the hereditary social set, the most economically powerful at a given moment, the lawyers and bankers who work for them, and a dollop of celebrities, together with all of their spouses. Clubbiness and ensuing relationships and connections is one of the reasons you go (or have your children go) to these schools. Oddly, it’s a world that rather appeals to Murdoch. It isn’t Geelong Grammar. It’s much more fluid, commercial. It’s where the elite meet—but to do some business. There isn’t much more pretense here than the pretense of moving up. Such schools are not just where smart children make lifelong connections but, also, where smart parents hook up. In the history of New York schools and the connections they facilitated, none may be so profitable as the introduction of Stan Shuman of Allen and Company to Rupert Murdoch at a parent function at the Dalton School, where Shuman’s son Michael, and Murdoch’s son Lachlan, both five, are in kindergarten together.
Murdoch takes naturally to the New York form of hustle—to its efficiency, its lack of pretense, its dollar domination. In London it is tricky to just call somebody up—that would be a downright suspicious move. In New York, you can connect seamlessly with anyone. Murdoch, a reluctant socializer, is a brilliant networker. He’s one of the early geniuses of the form. It’s a form that lacks prescribed social niceties and inefficiencies and thrives on direct value-added chat: just who
you know. The Murdoch progress in New York is all about efficiently extracting information.
In the beginning, it is not clear who’s hustling whom. Felker, along with most everyone else in New York, assumes that Murdoch is the rich foreigner, hence easy pickings. The rush to offer him things is not to benefit him but to take advantage of his optimistic newcomer’s buying mood. One would be foolish not to seize the opportunity that a rich foreigner presented.
When Felker introduces Murdoch to Dolly Schiff, the owner of the New York Post (seventy-three-year-old Schiff has a crush on fifty-one-year-old Felker), he knows he is introducing a potential seller to a wannabe player in a manic buying mood. Both Felker and Schiff think they’ve lucked into something a little too easy. Murdoch, with his I’ll-buy-anything purchase of the San Antonio papers and his hapless launch of the embarrassing National Star—his low-end tabloid meant to compete with the National Enquirer—seems like pretty classic dumb money.
When Murdoch goes down to the Allen and Company offices and engages Shuman to represent him in the matter of Dolly Schiff’s New York Post (Shuman’s first assignment is to sit next to Schiff at a dinner party Murdoch will shortly throw), Shuman too is rightly skeptical. But a fee is a fee.
Nobody quite knows that the deal-making style Murdoch is developing is that of the available outsider. To be underestimated is a cultivated part of his affect. The advantage of always moving on—a key advantage of the con man—is that it takes a while for your reputation to catch up with you.
What he’s already done in London, now he’ll do in New York.
The fading newspaper business—in the first of its many fadeouts, television and growing labor problems having depressed the value of papers in the sixties and seventies—gives Murdoch certain advantages. He can afford to buy himself both exposure (owning a paper makes you a public figure) and, because he has an appetite for vividness, cash flow (the more blood, the more sales).
The Man Who Owns the News: Inside the Secret World of Rupert Murdoch Page 16
