Murdoch Settles Lawsuit By Allowing Shareholder Vote On ‘Poison Pill’

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By: E&P Staff

The News Corporation has settled a lawsuit brought by international institutional investors that claimed the media had defrauded shareholders by extending a so-called “poison pill” provision adopted in 2004 without getting shareholder approval.

Under the settlement, News Corporation has agreed to put a special proposal on the agenda for its next annual meeting, in October, allowing shareholders to vote on whether to extend the poison pill for two years. The proposal would also allow News Corp to extend the provision or an additional year, until October 2009, “but only if necessary to address concerns over possible moves by Liberty Media in acquiring a controlling interest in News Corp.,” according to Grant & Eisenhofer, the law firm that represented the group of pension fund investors from the U.S., Britain, Australia and the Netherlands.

A poison pill is a strategy designed to make a hostile takeover of a company prohibitively expensive or more difficult. News Corp. adopted the pill in November 2004 when Liberty Media, the cable television company controlled by John C. Malone, increased its stake in the company to 17%.

The suing shareholder groups contended that News Corp. Chairman Rupert Murdoch, who was then seeking to reincorporate from Australia to the United States, pledged not to extend the 2004 poison pill beyond a 12-month period without shareholder approval.

The case was settled two weeks before it was to go to trial in Delaware Chancery Court, and shortly before Murdoch was scheduled to give a deposition in the lawsuit.

News Corp. spokesperson Andrew Butcher told E&P the company would have no comment on the settlement until its board meets next week.

Stuart Grant, a lawyer representing the shareholder group, said the settlement was a “great victory for shareholder rights.”

“From Day One, we have consistently said that this case was not about the poison pill, but was about securing the shareholders’ right to vote on the matter, as promised by News Corp. when the provision was negotiated as part of the company’s change in incorporation in 2004,” he said in a statement. “Through the settlement, shareholders have the guaranteed right to vote on the poison pill now, and on subsequent poison pills for the next twenty years.”

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