Risk & Compliance

News Corp. Settles Poison-Pill Suit

Shareholders sought the right to vote on the media giant's hostile-takeover protection.
Stephen TaubApril 6, 2006

A group of international institutional investors and News Corporation have reached a settlement of the investors’ lawsuit demanding that shareholders be allowed to vote on the company’s extension of a poison-pill provision.

The deal came just two weeks before a scheduled trial was to have begun in Delaware Chancery Court. Under the agreement, which is subject to court approval, the media giant has agreed to submit at its annual meeting this October a special proposal to enable shareholders to vote on whether to extend the poison pill for two years.

The proposal would also allow News Corp to extend the pill for one added year (until October 2009), but only if it’s needed to address concerns over possible moves by Liberty Media in acquiring a controlling interest in the company, according to a press release issued by attorneys for the plaintiffs.

By using poison pill strategies, corporations try to discourage hostile takeovers by attempting to make their stock less alluring to acquirers.

If the proposal is approved, shareholders will have the right to vote on later poison pill provisions for the next 20 years, according to the release. “We are very proud of the resolution reached with News Corp,” said Stuart Grant, whose firm Grant & Eisenhofer is counsel for the shareholder group.

News Corp spokesman Andrew Butcher told Bloomberg that the company had no comment on the agreement. Liberty Media representative John Orr didn’t immediately return a call for comment, according to the news service.

Made up of pension funds in the United States, the United Kingdom, Australia, and, the Netherlands, the investor group sued News Corp. last fall. The plaintiffs contended that the media giant was required to keep its promise not to extend its poison-pill provision beyond a 12-month period without express shareholder approval. The pledge was made to win shareholder support for a plan to reincorporate the company from Australia to Delaware.

Last November the company renewed its poison pill for another two years, anyway. “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,” Grant said. “This is a great victory for shareholder rights.”