AUSTRALIA: News Corp sued by shareholders over 'poison pill'

Murdoch extends 'poison pill' for another two years despite original policy; angry investors sue

The Straits Times
Tuesday, October 11, 2005

Sydney --- Mr. Rupert Murdoch's News Corporation is being sued by 12 large pension and investment funds for its alleged failure to honour a pledge to allow a shareholder vote on changes to 'poison pill' takeover defences.

Such defences, known as poison pills, are designed to ward off hostile bidders, usually by flooding the market with shares, making the target company more expensive and difficult to buy.

Separately, shareholder proxy firms are urging investors to rebuke Newscorp by withholding votes on the re-election of Mr Peter Chernin, chief operating officer, and Mr Rod Eddington, audit committee chairman, at this month's company meeting.

Institutional Shareholder Services, whose recommendations are closely followed by American institutional investors, said that News Corp stockholders should also withhold votes against Mr Chase Carey, chief executive of DirecTV, and Mr Andrew Knight, an independent director.

Corporate Governance International, a Sydney proxy firm, is expected to urge similar action.

The funds suing News Corp include ABP, the Dutch pension fund; Hermes and USS from Britain; Connecticut Retirement Plans and Trust Funds; and a number of large Australian funds coordinated by the Australian Council of Super Investors.

News Corp said the suit was 'frivolous and without merit'.

In October last year, News Corp said it would 'establish a policy that, if a stockholder rights plan 'poison pill' is adopted without prior stockholder approval, it will expire after one year unless ratified by stockholders'.

In August, however, the poison pill adopted to prevent Mr John Malone, the media investor, from increasing his voting stake beyond the 18 per cent accumulated without Mr Murdoch's knowledge, was extended for another two years. Mr Murdoch, when asked about this decision, said merely there had been a change of company policy.

News Corp's resolutions are unlikely to be defeated at the Oct 21 meeting as the Murdoch family owns about 30 per cent of voting shares and is backed by Prince Alwaleedbin Talal, a Saudi investor with 5.5 per cent of the voting stock.

Date Posted: 10/11/2005