Shareholders challenge value of Shine deal
News Corp. is being accused of nepotism in its $675 million deal to buy Shine Group, which is run by his daughter, Elisabeth Murdoch.
News Corp. shareholders, the Amalgamated Bank of New York and the Central Laborers Pension Fund, filed a lawsuit Wednesday in a Delaware court alleging that the deal was a case of “nepotism,” and the News Corp. board had failed to question or challenge Rupert Murdoch.
“In addition to larding the executive ranks of the company with his offspring, Murdoch constantly engages in transactions designed to benefit family members,” said the lawsuit by Amalgamated Bank, a trustee for several investment funds.
It accuses Murdoch of treating News Corp. “like a wholly owned family candy store,” and argues that a fair price was not achieved for Shine.
“Although the transaction makes little or no sense for News Corp. and is far above a price any independent, disinterested party would pay for Shine, it is unsurprising that the transaction was approved by News Corp.’s board,” the filing states.
Amalgamated Bank holds about 1 million shares or 0.003% of News Corp. stock.
A News Corp. spokeswoman said the case was “without merit.”
At an investor conference last week, News Corp. prexy Chase Carey defended the Shine deal.
“Shine, realistically, is a great fit for us. The heart of our business is content, channels and platforms, and really it starts with content. Content drives the channels, and the channels drive the platforms. And so it is the top of the food chain,” Carey said during a Deutsche Bank Conference in Palm Beach, Fla. “It’s a great company with a great fit. We’re buying it at a 10 multiple on 2011 (earnings). We think it’s a fair value and really is in the sweet spot of something that adds dimensions to the heart of our business.”
Elsewhere, commentators have said that acquiring Shine makes sense for News Corp. because the move provides further evidence of the company’s determination to beef up its content-based activities and to expand its international range.
Shine is one of the U.K.’s biggest production houses, whose hits include “MasterChef.” It also owns shingles in the U.S. including Reveille, the U.K. such as Kudos, mainland Europe and Oz.
The deal must still win approval of the independent directors of News Corp.’s audit committee, which has its own outside counsel. It will also be subject to an independent fairness opinion. Still, execs expect the deal to close March 31.
It will see Elisabeth Murdoch, who formed Shine following a spell running the programming arm of U.K. paybox BSkyB, take a seat on the board of News Corp., where she will join her younger brothers, James, who runs the conglom’s activities outside the U.S., and Lachlan, who no longer works for News Corp.
(Tom Lowry in New York contributed to this report.)