Investors sue News Corp and chairman Rupert Murdoch

Televisionpoint.com Team
An investor suit alleges that News Corp and its chairman Rupert Murdoch reneged on promises about shareholder protection at the time of its move from Australia to the United States, lawyers announced on Friday, reports say.

The institutional investors claim in a suit filed in the state of Delaware that the media entertainment giant broke promises on corporate governance that would "balance the power of the Murdoch clan," at the time of the reincorporation of the former Australian firm.

"Shareholders feel betrayed after voting to approve switch from Australian incorporation of News Corp to Delaware reincorporation," said a statement from the law firm representing the plaintiffs.

"In return for approving the move, shareholders insisted on the no-long-term-poison-pill promise, as well other assurances of improved corporate governance that would balance the power of the Murdoch clan," the statement said.

A 'poison pill' is a measure used to defend against hostile takeovers by allowing the company to issue special shares that make a takeover far more expensive.

"Shareholders considered these assurances necessary before agreeing to reincorporation because Australian corporate law generally provides greater protections for shareholders than Delaware corporate law," the statement said.

Murdoch and his family own 30 percent of News Corp's common stock, according to the suit.

The investors feared that given free reign under Delaware law, News Corp. could adopt provisions "that would allow them to become permanently entrenched and impervious to shareholder and outside scrutiny," the statement said.

Responding to the suit, News Corp said, "The company has reviewed the complaint and found it baseless, frivolous and without merit."

The reincorporation became effective on November 12, 2004. But on August 11, the suit alleges, News Corp "unilaterally announced that come November 8 the company would extend its poison pill provision for two more years," the statement said.

The suit seeks to nullify that extension and bar News Corp. from going forward with its plan. "The argument is not about the merits of the Shareholder Rights Plan. Our members simply want News Corp to keep its word," said Michael O'Sullivan, president of the Australian Council of Super Investors, one of the plaintiffs.

O'Sullivan said that the suit raises questions about where "shareholders were misled in 2004, in order to win support for the re-domicile."

The plaintiffs include managers of pension funds from the US state of Connecticut and from Clinton Township, Michigan; Australian pension funds UniSuper Ltd., Public Sector Superannuation Scheme Board, Commonwealth Superannuation Scheme Board, United Super Pty. Ltd., Motor Trades Association of Australia Superannuation Fund Pty Ltd, HEST Australia Limited and CARE Super Pty Ltd.

Other foreign institutional investors participating in the suit include British-based Hermes Assured Limited and Universities Superannuation Scheme Limited; and Dutch-based Stichting Pensioenfonds ABP.

In addition to Rupert Murdoch and his son Lachlan, the suit names News Corp officers and directors.

News Corp is the umbrella company for an empire that includes Fox studios and television operations, London-based satellite TV company BSkyB, newspapers including The Times of London, New York Post, The Australian and other publishing and media operations.

Shares of News Corp. fell 14 cents to 15.82 on Wall Street.