August 11, 2005
A Buoyed Murdoch Blocks a Major Investor
By RICHARD SIKLOS
NY Times
http://www.nytimes.com/2005/08/11/business/media/11news.html?pagewanted=print
Rupert Murdoch gave the cold shoulder to his largest shareholder, John C.
Malone, yesterday by extending a poison pill that blocks Mr. Malone's
Liberty Media Corporation from buying more shares of Mr. Murdoch's News
Corporation.
But the consolation prize for Mr. Malone was that the News Corporation
reported strong earnings exceeding analyst expectations, increased its
dividend and projected solid growth in the year ahead. Mr. Murdoch also
said the company may spend up to $2 billion building Internet assets and
was in advanced talks to buy a controlling stake in an Internet search engine.
The shareholder rights plan, or poison pill, was put in place for a period
of one year last November, but was extended by the News Corporation's board
for two more years. Mr. Murdoch indicated talks with Mr. Malone about
swapping assets for the shares or entering into some kind of standstill
arrangement had stalled.
"We've frankly moved on," Mr. Murdoch said in a conference call. "When
Liberty comes up with a plan that is acceptable to them we'll have to look
at it. You'll have to ask Mr. Malone."
Mr. Murdoch indicated he has also moved on, corporately at least, from the
resignation of his son Lachlan as the company's deputy chief operating
officer and potential successor as chief executive. Amid tensions stemming
mainly from his father's involvement in the businesses he oversaw, Lachlan
said he was moving to Australia with his family.
"There's nothing to be said other than what Lachlan said and what I said a
couple of weeks ago," Mr. Murdoch said. "Any succession planning is up to
the board of News Corporation to do what they think is best for all the
shareholders."
Lachlan's departure also came amid a rift stemming from Mr. Murdoch's
desire that his two young daughters by his third wife be given equal
footing in family trusts that, as now structured, will eventually pass
control of the News Corporation to his four children from two previous
marriages.
The trusts were created as part of the settlement of his 1999 divorce from
Anna Murdoch Mann, his wife of 31 years and the mother of Lachlan and two
of his siblings.
Mrs. Mann's lawyer, Daniel Jaffe, said in an interview last week that the
trusts were set up to specifically prohibit Mr. Murdoch from making such a
change. Asked yesterday in the conference call whether a change to the
trust is being contemplated, Mr. Murdoch said: "I don't think you're very
wise to be listening to loose-lipped divorce lawyers. Frankly there is no
change" to the trusts.
A Liberty spokesman said Mr. Malone had no comment.
Mr. Malone built an 18 percent voting stake in the News Corporation last
year, to Mr. Murdoch's surprise, while professing friendly intentions to
Mr. Murdoch, a sometime business partner. In a conference call last week,
Mr. Malone said he did not expect to sell the shares any time soon and
hoped the company's strategy would be focused "a little more on shareholder
returns and less on empire building."
Mr. Murdoch controls 29.5 percent of the company's voting stock.
When the News Corporation's directors announced the pill last October, they
said they had a policy allowing them to keep the pill in place for no more
than a year without either letting it expire or putting it to a shareholder
vote. In extending the pill, Mr. Murdoch said yesterday, the board had
changed that policy.
The analyst Richard Greenfield of Fulcrum Global Partners applauded Mr.
Murdoch's tactics. "You've seen today where the leverage rests - with
Murdoch, not with Malone," Mr. Greenfield said. "You own this stock for
Rupert's vision. Any threats to that vision should be protected by the
company." In the conference call, Mr. Murdoch emphasized the company was
serious about competing on the Internet.
After spending $580 million to acquire Intermix Media and its popular
social networking site Myspace.com, Mr. Murdoch said the company could
spend double that and possibly up to $2 billion to buy Internet assets to
complement what the company would build internally.
The company also last week acquired the sports Web business Scout Media for
$60 million, and Mr. Murdoch said the company is "in very advanced
negotiations to buy a controlling interest in what we think is a wonderful
search engine."
The media conglomerate reported net income for the fourth quarter ended
June 30 of $717 million, or 22 cents per share, compared to $429 million or
15 cents per share in the year-earlier period. A survey of 16 analysts by
Thomson Financial had forecast earnings of 18 cents for the quarter.
Revenues increased 12 percent to $6.1 billion from $5.5 billion in the
year-earlier period.
================================
George Antunes, Political Science Dept
University of Houston; Houston, TX 77204
Voice: 713-743-3923 Fax: 713-743-3927
antunes at uh dot edu
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