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Rupert Murdoch’s News Corp said Wednesday that its board of directors has authorized a $1 billion stock buyback program, terminated a shareholder rights plan, also known as a “poison pill,” which is a defense against hostile takeovers, and struck a deal with the Murdoch family to cap any increase in its voting power.
The moves amount to a limit on the vast influence that the Murdochs have over the company as it positions itself as a buyer, recently embarking on a spending spree to acquire assets including publisher Houghton Mifflin Harcourt, finance paper Investors Business Daily and data provider Oil Price Information Service for more than $1.5 billion altogether.
The media company’s deal with the Murdoch Family Trust “limits the potential accretion of voting power by the Trust and Murdoch family members through market purchases or as an indirect result of repurchases by the company of shares of Class B common stock,” News Corp said. “The stockholders agreement provides that the Trust and the company will not take actions that would result in the Trust and Murdoch family members together owning more than 44 percent of the outstanding voting power of the Class B common stock, or would increase the Trust’s voting power by more than 1.75 percent in any rolling 12-month period.”
The poison pill had been in place since the company’s inception in 2013 following the separation of 21st Century Fox.
The News Corp filing added that the trust would “forfeit votes in connection with an annual or special company stockholders meeting to the extent necessary to ensure that the Trust and the Murdoch family collectively do not exceed 44 percent of the outstanding voting power of the shares of Class B common stock at such meeting, except where a Murdoch family member votes their own shares differently from the Trust on any matter.”
The stockholders agreement will terminate upon the Trust’s distribution of all or substantially all of its Class B common stock, the firm noted.
Rupert Murdoch is executive chairman, and son Lachlan Murdoch co-chairman of News Corp.
As of mid-year, the trust owned a 38.4 percent voting stake in News Corp, while Rupert Murdoch held an additional 1 percent. Stock buybacks could boost their voting power, though.
“These landmark decisions follow our most profitable year since the launch of the new News Corp in 2013 and are a tangible sign of our confidence in the inherent value and enormous potential of our businesses,” said CEO Robert Thomson. “With the board’s active support, we are acutely focused on long-term value for investors, balancing strategic investments and capital returns. Our robust cash balance and strong free cash flow have enabled us to launch a much larger, more aggressive buyback program that we intend to begin after our quiet period ends.”
Fox Corp. in 2019 set a poison pill provision as well, to avoid unwanted takeover plays.
The defensive measure gives existing shareholders the right to buy added stock at a discount, making a takeover attempt more expensive and difficult. The stock trading volatility that came with the coronavirus pandemic was seen as a potential breeding ground for hostile takeover attempts when stocks were hit hard, leading to a comeback of poison pill provisions in the media and entertainment sector.
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