News Corp.'s new 'poison pill' clause designed to prevent shareholder from buying stake that could challenge Rupert Murdoch; new shareholder rights plan entitles shareholders to bolster positions if anyone amasses 15% or more of voting shares
May 24, 2013
– News Corp, which will separate its highly profitable television and entertainment arm from its troubled newspaper and book publishing assets next month, set out plans for the new structure on Friday, ahead of a meeting with investors next week.
Once separated, the new companies - 21st Century Fox and News Corp resopectively - will be subject to a so-called "poison pill" clause, designed to prevent anyone from building a stake that could help them challenge Mr Murdoch's own.
The "shareholder rights plan" means that, if any new shareholder amasses 15pc or more of top-tier voting shares in either of the new companies, the existing shareholders will be entitled to bolster their own positions by buying additional shares at half price.
News Corp's dual-class share structure already affords Mr Murdoch disproportionate control of the business. His family owns around 7pc of the business, but most of its stock is in voting shares, confusingly dubbed class B, handing him around 40pc of the voting power.
The dual-class share structure has been heavily criticised by corporate governance campaigners and News Corp shareholders, but without enough class B shares to out-vote Mr Murdoch, they have not been able to force a change.
The plans also reveal that James Murdoch will sit on the boards of both companies. The move is likely to anger shareholders who feel his reputation has been too heavily tarnished by the News of the World phone hacking scandal and that he is now a drag on the business.
James will be joined on the boards of News Corp and 21st Century Fox by his brother Lachlan Murdoch. However, their sister Elisabeth, who opted to "delay" her ascension to the News Corp board at the height of the hacking scandal, will not join either company as a director.
Once News Corp splits, shareholders will receive one share in the new New Corp ﾖ the newspaper and publishing division ﾖ for every four shares in 21st Century Fox. The television and film operation generated around three quarters of News Corp's $33.4bn revenues last year, and 90pc of its profits.
Last month, it emerged that Mr Murdoch will also get a $3.7m pay rise after the company divides. His base pay will remain the same as last year, but his performance-related pay means he will be able to collect up to $28.3m a year. News Corp said in a filing with Americaﾒs Securities and Exchange Commission (SEC) that the pay hike was ﾓcompetitive and appropriate given Mr Murdochﾒs responsibilities associated with two separate public companies.