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On Sept. 22, News Corp, led by executive chairman Rupert Murdoch and his son, co-chair Lachlan Murdoch, made a change to its corporate governance that it had been in place since the newspaper and publishing giant was formed when it was spun off from Fox in 2013.
The board of directors capped the voting stake of the Murdoch family at 44 percent, as disclosed in a Securities and Exchange Commission filing. News Corp also authorized a $1 billion stock buyback program and terminated a shareholder rights plan, also known as a “poison pill” or defense against hostile takeovers, which had been in place since the company’s inception. The “poison pill” would have been triggered if any investor had acquired 15 percent or more of voting shares.
The scrapping of the defense and a new deal with the Murdochs to cap any increase in the voting power of the Murdoch Family Trust, which currently holds a voting stake of 38 percent, and chairman Rupert Murdoch, who owns a 1 percent voting stake, amount to a limit on the influence of the mogul and a possible opening up to other voices, Wall Street observers noted.
Investors also seemed to give the news a positive reception, with Class B voting share ending up 3.8 percent on Wednesday, with Class A non-voting shares closing 4.1 percent higher.
“There’s no doubt the optics are very positive for investors,” Morningstar analyst Brian Han tells The Hollywood Reporter. But he also cautioned: “In reality, though, not sure much will change.”
Han adds: “The termination of the stockholder rights agreement would have been more meaningful when the stock price was below $10 early last year, versus the current buoyant levels.”
Macquarie Capital analyst Darren Leung, however, called the company moves “positive to ESG,” an abbreviation for Environmental, Social and Governance issues and investors focused on them.
Plus, smaller investors and their voices could get a boost from the moves. “In essence, the cap to minority shareholders is removed [15 percent] and should allow greater equity participation on the register,” Leung says. “The change to share structure is important as it allows a potential aggressor to agitate for change given sufficient capital and/or support from other investors.”
As far as the stock repurchase program is concerned, Han sees its impact as dependent on its actual size. “The buyback shows News Corp is listening to investors on capital management,” he explains. “But, under the previous $500 million program, the company bought back less than 15 percent of the stipulated amount.”
Leung estimated the positive impact of the $1 billion stock buyback on earnings, writing that it would be “7.3 percent accretive to fiscal-year 2023 earnings per share on an annualized basis.”
News Corp, owner of the likes of Dow Jones, The Wall Street Journal, New York Post, The Sun and Times owner News UK and HarperCollins, has recently embarked on a buying spree with deals for publisher Houghton Mifflin Harcourt, finance paper Investors Business Daily and data provider Oil Price Information Service.
“We are generating record profits and cash, and that has given us the ability to make opportunistic acquisitions to bolster the company and generate even more momentum,” noted chief executive Robert Thomson on its Aug. 5 earnings call. “We will certainly be thoughtful and strategic in deploying our assets and will, as always, be cognizant of our responsibility to and the interest of all of our shareholders.”
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