News Corp. has agreed to put its anti-takeover poison pill defense to shareholder vote, backing down from an earlier stance and settling a lawsuit that was set to go to trial later this month in Delaware Chancery Court.
News Corp.’s board adopted the measure in 2004 to fend off a potential bear hug by John Malone. The Liberty Media chief had surprised Rupert Murdoch by acquiring an uncomfortably large chunk of News Corp. voting stock.
Australian and European investors claimed in the suit that News Corp. had promised to let shareholders vote on whether to keep the poison pill in place. They said News Corp. made the pledge as it sought their support for a shift in domicile from Australia to the U.S.
Conglom successfully completed the move, then announced plans to keep the pill in place for at least two more years.
Shareholders, including two U.S. pension funds, sued.
A poison pill makes it extremely complex and expensive for a raider to launch a hostile takeover of a company.
But shareholders can be wary of the defense, since it can stymie a takeover that might be lucrative for them even if it’s not embraced by a company’s management.
Australian securities law requires companies to put poison pill measures to shareholder vote. U.S. law doesn’t.
“News Corp. always made it about Malone,” said Stuart Grant of Grant & Eisenhofer, counsel for the shareholders group.
“We have consistently said that this case was not about the poison pill but was about securing shareholder right to vote on the matter as promised by News Corp.” He said shareholders aren’t necessarily averse to the measure.
News Corp. declined to comment.
Grant said the trial had been taken off the court calendar but that settlement papers still await signing. Final resolution is up to Judge William Chandler III — now well known as the judge in the Eisner-Ovitz case.
News Corp.’s annual meeting is in October. Murdoch, who owns about 30% of the voting shares, is sure to lobby hard to keep the provision in place.
It will be interesting to see how Liberty votes.
News Corp. and Liberty have been negotiating on and off for more than a year to construct an asset swap or deal that would unravel Liberty’s 18% stake, but the two sides seem at an impasse.
“In the interim, we hold an asset that we like, and we feel good about, and frankly one that we might be able to exert more influence upon,” Liberty CEO Gregory Maffei said during a conference call last month.