A Delaware Chancery judge threw out a lawsuit that challenged News Corp.’s extension of a “poison pill” provision without shareholder approval.
In a lawsuit filed last year, Miramar Police Officers’ Retirement Plan claimed that News Corp. was bound by a 2006 settlement agreement that provided that the Rupert Murdoch-controlled media conglomerate could not maintain a stockholder rights plan for longer than one year without obtaining shareholder approval.
News Corp. spun off into two entities in 2013, when the broadcast and entertainment portion became 21st Century Fox and the newspaper and publishing was named News Corp.
But Delaware Chancellor Andre G. Bouchard ruled that because the creation of the “new” News Corp. was really a spinoff into a new company, it was not bound by the 2006 settlement agreement. Instead, it was 21st Century Fox that took on those liabilities of the “old” News Corp.
Bouchard rejected the plaintiff’s contention that the transfer of the newspaper and publishing assets into the “new” News Corp. meant they were bound by the settlement agreement. He said such reasoning “would lead to absurd and unfounded results.”
Bouchard noted that the settlement agreement was “binding on any entity into which old News Corp. merges or with which it consolidates,” but did not specify whether it was binding on asset transfers or spinoffs. He concluded that it didn’t.
He wrote that if “old News Corp. were to sell five television trucks to five different public entities, each of those entities would be subject to” the settlement agreement.