News Corp. Moves to Fix Breach of Foreign Media Ownership Rules (Report)

1:04 AM PST 04/18/2012 by Georg Szalai
Justin Sullivan/Getty Images

Rupert Murdoch's entertainment conglomerate has discovered an inadvertent breach of ownership limits and will suspend half the voting rights of foreign shareholders.

LONDON - Rupert Murdoch's News Corp. is expected to suspend half the voting rights of foreign shareholders on Wednesday to address an inadvertent breach of U.S. foreign ownership limits, the Wall Street Journal reported.

The Communications Act of 1934 limits foreign ownership of a broadcaster to 25 percent. The suspension will last until the entertainment giant is back in compliance with the ownership rules, according to the paper, which is owned by News Corp.

The Journal said the conglomerate did a survey of its foreign ownership ahead of the renewal of certain broadcast licenses and discovered that voting stock held by foreign investors had exceeded the 25 percent mark. It wasn't immediately clear by how much or when the company had last checked on its ownership.

News Corp.'s international shareholders include Saudi investor Prince Alwaleed bin Talal who owns about 7 percent of the voting stock in the company and is a close ally of the Murdoch family, meaning that the voting rights suspension could somewhat weaken Murdoch's overall voting power temporarily. The company also traditionally has a strong shareholder base in Australia and the U.K.

The Murdoch family, which controls a voting stake of about 40 percent, is counted as a U.S. owner since Murdoch became an American citizen in the 1980s.

In a statement, News Corp. said approximately 36 percent of the company’s Class B common stock is owned by non-U.S. Stockholders, saying that "the suspension will not impact the rights of non-U.S. Stockholders of Class B Common Stock to receive dividends and distributions."

Detailing the effects on the voting power of Murdoch and the Murdoch Family Trust, News Corp. said they have agreed "not to vote or provide voting instructions with respect to a portion of the shares of Class B common stock they own during the voting rights suspension period, to the extent that doing so would increase their percentage of voting power from what it was prior to the suspension. Accordingly, after the suspension of voting rights, the aggregate percentage vote of the Murdoch family interests will remain initially at 39.7 percent of the outstanding shares of Class B common stock not subject to the suspension of voting rights."

The company said it would revise the suspension "based on its ongoing monitoring of the level of foreign ownership," News Corp. said.

The conglomerate also explained that its move helps it safeguard its valuable broadcast business. "This action secures the critical assets of News Corporation’s valuable television segment, representing the company’s 27 owned-and-operated stations and the Fox Broadcasting Company, which together generated $4.8 billion in revenue and $681 million in operating profit in fiscal 2011," it said.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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