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Dow Jones options trading is probed

Trades in call options surged before Rupert Murdoch's News Corp. made a takeover bid.

WASHINGTON - Federal and state authorities are investigating suspicious options trading in Dow Jones & Co. Inc. stock before the announcement last week of News Corp.'s $5 billion bid for the financial-news publisher.

The news of the $60-per-share bid by Rupert Murdoch's company sent Dow Jones shares soaring. A spokesman for Dow Jones, which publishes the Wall Street Journal, said yesterday that it had received a subpoena from the New York Attorney General's Office and a request for information from the Securities and Exchange Commission regarding options trading.

Dow Jones will "cooperate fully" with the authorities, company spokesman Howard Hoffman said.

SEC spokesman John Nester declined to comment, as did Jeffrey Lerner, a spokesman for the New York attorney general, Andrew Cuomo.

News Corp. did not immediately return a telephone call seeking comment yesterday. A company spokesman told the Journal late last week that News Corp. had received a subpoena from Cuomo's office and an inquiry from the SEC.

Trading surged in Dow Jones call options, which give purchasers the right to buy shares of the corresponding stock at a specified price by a certain date - usually reflecting a bet by buyers that the stock will rise in value. The trading pattern suggests that some investors may have known about Murdoch's offer before it was publicly disclosed.

More than 10,000 call options on Dow Jones stock were traded in late April, compared with about 7,000 during the entire January-to-March quarter.

Murdoch's bid has been opposed by Dow Jones' controlling shareholders, the Bancroft family, but the family is not united in its stance.

A family representative indicated that Bancroft family members representing 52 percent of the company's shareholder vote would oppose the bid - not quite all of the family's voting power of 64 percent, the company said.

On Sunday, the bid ran into more resistance as Jim Ottaway Jr., a former Dow Jones board member and large company shareholder, said he strongly opposed it. In a statement posted on the Journal's Web site, Ottaway said a Murdoch takeover would bring the "loss of the independence and integrity of a leading national editorial voice."

Shares of Dow Jones lost 29 cents, to $55.51, in trading yesterday. Shares of News Corp. were up 27 cents at $23.85.