Murdoch’s News Corp. Will ‘Declassify’ Board After Buying Out Liberty Media

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By: Mark Fitzgerald

In a proxy statement filed with the Securities and Exchange Commission (SEC) Thursday, Rupert Murdoch’s News Corp. said it would end the staggered election of its directors — but not until it has completed the buyback of a big stake of super-voting stock held by John Malone’s Liberty Media Corp.

Liberty Media controls 19.1% of the Class A super-voting shares, and once suggested it might consider challenging Murdoch’s control of the media giant. Murdoch himself holds a 31.2% stake of Class A
shares, with a family trust holding another 30.1%.

News Corp. adopted the so-called “classified” election system for its board of directors when Malone began amassing a larger stake in the company. Under the system, three “classes” of directors are elected on different years. The system prevents a rapid takeover of a board, but corporate governance advocates argue that it also entrenches management to the possible detriment of shareholders.

At the end of 2006, Liberty agreed to swap its Class A and Class B shares for News Corp.’s stake in DirectTV, its interest in three regional sports cable networks, and $588 million in cash.

“Given the substantial number of shares of the company’s common stock held by Liberty Media Corporation, and Liberty’s public statement regarding its investment in the company’s common stock made prior to Liberty’s announcement of its agreement to exchange its shares of the company’s common stock under the Share Exchange Agreement, the board feels that the risk of such an unfriendly or unsolicited takeover or restructure proposal from a third party is significant prior to the closing of the transactions contemplated under the Share Exchange Agreement,” the proxy states.

News Corp. said it expects the deal to close at the end of the year. At that point, the company added, the board will propose declassifying the directors.

A shareholder proposal to declassify the board, proposed by the well-known corporate gadfly Evelyn Y. Davis, will be voted on at the company’s annual meeting in New York City Oct. 10.

In the proxy, News Corp. management recommends shareholder vote against the declassification proposal — and a separate shareholder proposal to eliminate the dual class of stock that gives Murdoch and his family effective control of the company.

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