News Corp suspends some non-US stock voting rights

LOS ANGELES (AP) - News Corp., the owner of the Fox television network, said Wednesday that it suspended the voting rights of some stock owned by foreigners to comply with a U.S. law that restricts the foreign ownership of broadcast licenses.

The company said it discovered a potential violation as it was preparing to renew licenses for its 27 owned-and-operated TV stations.

The suspension affects half the voting rights of non-U.S. owners of News Corp.'s Class B shares, the class of stock with voting rights. The more widely traded Class A shares carry no votes in important decisions such as board member elections.

Normally, such a move would increase the voting power of CEO and founder Rupert Murdoch and his family's trust, which holds a 39.7 percent voting stake in the company. But News Corp. said they agreed to refrain from voting shares they hold in a way that would increase their grip on the company.

Under U.S. law, non-U.S. stockholders cannot own or control more than 25 percent of companies that have broadcast station licenses. News Corp. said it reviewed its foreign ownership before it applied to renew licenses and found that 36 percent of its Class B voting shares were held by non-U.S. stockholders.

The suspension would be felt greatest by a key Murdoch backer, Saudi Prince Alwaleed Bin Talal, who holds 7 percent of Class B shares.

Analysts shrugged off the change, saying nothing imminent required a vote.

"It's just a temporary thing," Miller Tabak & Co. analyst David Joyce said.

The price difference between voting Class B shares and non-voting Class A shares shrank by 3 cents Wednesday. Class B shares were down 15 cents to close at $19.63, while Class A shares were down 12 cents to $19.27.

Joyce said the shrinking of that gap was not significant.

Standard & Poor's equity analyst Tuna Amobi said the Murdoch family's agreement to a voting standstill was an acknowledgement of persisting governance concerns by institutional shareholders such as the California Public Employees' Retirement System and the New York City Pension Funds.

Murdoch's control over the company has come under fire as it deals with a phone-hacking and bribery scandal in the U.K. It has also been sued for acting against shareholder interests in its $670 million purchase of Shine Group, the U.K. television production company founded by Murdoch's daughter Elisabeth.

While the rights suspension reduces the power of foreign shareholders, it increases the voting power of U.S. shareholders, including those who have been most vocal in calling for change.

"It remains to be seen how they can exercise that clout to any meaningful degree," Amobi said.

Shareholders upset with the hacking scandal cast a protest vote at the company's annual meeting in October, with 35 percent of Class B shareholders voting against the re-election of Murdoch's son James to the board. He had been at the heart of dealing with the U.K. scandal before reducing his role in the company's British operations in recent months.

Even with greater voting power by U.S. shareholders, the vote against James Murdoch would not have exceeded 50 percent.

The sudden suspension of some foreign voting rights represents a huge oversight by News Corp., said Rich Clayton, the research director of CtW Investment Group, a shareholder advisory group that works with U.S. union pension funds.

It raised questions about how long the company was out of compliance, how it would rectify the situation and how the Murdochs will re-apportion their extra voting power, he said.

"Shareholders would be right to demand that the company explain itself more clearly," he said.

News Corp. said it would keep the voting suspension in place as long as it deems necessary to comply with U.S. law. It did not say how long that might be or what it was doing to get there.

Lazard Capital analyst Barton Crockett said he expected some foreign shareholders to sell off some shares in order to bring the company back in compliance before the annual shareholders meeting in the fall. He didn't expect selling pressure to hurt shares much.

"I think you're looking at a ripple, not a tidal wave" of selling, he said.

The suspension will not affect the rights of those shareholders to receive dividends and distributions.

News Corp. said the move secures the assets of its TV segment, which includes TV stations and the Fox broadcast network. The unit generated $4.8 billion of the company's $33.4 billion in revenue last year.

Upcoming Events