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To assure that good money was not chasing bad money a

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Unformatted text preview: ce­to­book ratio is the market price (per share) divided by the book value (per share). Prior to the buyout offer, the price­to­book ratio of Dow Jones was 6.0 ($36 per share divided by $6 per share). After the buyout offer, the ratio jumped to 9.8 ($58.60 per share divided by $6 per share). ID12–8 Concluded c. Two reasons might explain the high offer for Dow Jones. First, News Corporation might see some specific synergies of operation between its media businesses and those of Dow Jones (including the Wall Street Journal and the popular WSJ website); the combined businesses might be worth more to News Corporation than they would be to other investors. Other investors might only see $36 in value based on the projected cash flow of Dow Jones, but News Corporation might see $60 in value because of future business plans combining and growing the two companies together. Secondly, many market watchers speculated that News Corporation offered such a premium for Dow Jones simply to scare...
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