WILMINGTON, Del. (CN) – News Corp. shareholders object to Rupert Murdoch’s plan to spend $675 million of company money to buy a film production firm owned and operated by his daughter, Elisabeth Murdoch, “to bring Elisabeth back to the family business.” The lead plaintiff, a bank, says, “Murdoch is causing News Corp to pay $675 million for nepotism.”
Amalgamated Bank, which owns almost 1 million shares of News Corp common stock and manages about $12 billion for institutional investors, is lead plaintiff in the shareholders derivative complaint in Chancery Court.
The bank claims that “News Corp’s board has approved the transaction without question or challenge to Murdoch,” though the transaction “is unquestionably unfairly priced since, by a number of metrics, News Corp has agreed to pay a far higher price than was paid in comparable transactions in the last year.”
There is no reason for News Corp to buy the Shine Group except to “reward Murdoch’s family member and to perpetuate his family’s involvement in the senior management of News Corp,” the complaint states.
Elisabeth Murdoch will get $320 million from the deal, and “she will be handed a seat on News Corp’s Board on a silver platter from her father,” according to the complaint.
Once “the prodigal daughter is back into the News Corp fold, she will vie with her brothers, board members James Murdoch and Lachlan Murdoch, for the position of successor to Rupert Murdoch’s global media dynasty,” the bank claims. “In short, Murdoch is causing News Corp to pay $675 million for nepotism.”
The bank says the purchase provides no material benefits to News Corp, “only succor to Murdoch, knowing that he will add another chink in his armor of control.”
The bank says that Murdoch “has treated News Corp like a wholly owned family candy store.”
It adds that the board is unwilling to stop Murdoch from using News Corp money “to achieve his own agenda” because most board members are Murdoch family members or friends.
The board has allowed Murdoch to “obtain excessive compensation for himself; undertake actions designed to maintain Murdoch’s control over News Corp; engage in activities using News Corp resources that have no business justification other than some personal political purpose of Murdoch; and impose rampant nepotism in the conduct of the business of the company,” the complaint states.
The bank says that by buying Shine Group, a decision “patently intended to further the selfish interests of News Corp’s controlling shareholder at the expense of News Corp, the individual defendants breached their fiduciary duties to the company.”
Murdoch’s “record running News Corp is replete with questionable governance practices, excessive compensation and insider dealings, with little or no opposition or even apparent oversight from the board,” according to the complaint.
It cites a Feb. 7, 2009 article by the Financial Times, stating: “In good times, investors in News Corp fret about ‘the Murdoch discount’ – the worry hanging over the stock that at any moment its dominating chairman and chief executive might decide to spend shareholders’ money on a large investment with uncertain payback.” And it cites an Aug. 2, 2010 valuation analysis of News Corp by Evercore Partners: “Given the Murdoch family dominance, the dual class structure, and the fact that the Murdoch interests may not be totally aligned with those of public shareholders, we use a higher 30 percent discount in calculating our public market valuation.”
Although the Murdoch family owns only 12 percent of the overall equity of News Corp, the family owns almost 40 percent of News Corp’s voting common stock, the complaint states.
Named as defendants along with K. Rupert Murdoch and News Corp are board members James Murdoch, Lachlan Murdoch, Chase Carey, David Devoe, Joel Klein, Arthur Siskind, Rod Eddington, Andrew Knight, Thomas Perkins, Peter Barnes, Jose Maria Aznar, Natalie Bancroft, Kenneth Cowley, Viet Dinh, and John Thornton.
Amalgamated Bank seeks an order declaring that defendants breached their fiduciary duties to the company, damages, costs, and expenses.
It is represented by Jay Eisenhofer with Grant & Eisenhofer.