News Corp, the media group led by Rupert Murdoch, on Monday announced plans for a poison pill rights issue to prevent a hostile takeover by potential predators such as Liberty Media, one of the company's largest shareholders.
The stockholder rights plan, agreed at a News Corp board meeting at the weekend, follows Liberty's decision to increase its voting interests in News Corp from 9.1 percent to up to 17 percent.
John Malone, Liberty's chairman and controlling shareholder, assured Mr. Murdoch in a telephone conversation last week that he was not planning a hostile move against News Corp. And officials at Liberty, whose other assets include 49 percent of the Discovery Network and control of the QVC home shopping channel, insisted the company regarded itself as an ally of News Corp.
Liberty is expected to face further questions on its intentions when it announces third quarter results on Tuesday.
Mr. Murdoch, however, was said to have been unnerved by Liberty's action which could threaten the Murdoch family's 29.5 percent voting control of News Corp.
“This action was taken without any discussion with, or prior notice to, News Corporation. For this and other reasons the company has put in place a rights plan to protect the best interests of all shareholders,” according to a News Corp statement.
News Corp said the rights plan would be exercised if a predator acquired 15 percent or more of the group, which boasts assets including controlling stakes in DirecTV, the largest U.S. cable operator, and British Sky Broadcasting, as well as Fox Entertainment and News International newspapers.
Under the plan, all News Corp shareholders will receive rights over their stock allowing them to acquire additional shares at a 50 percent discount. Analysts at Goldman Sachs said: “Effectively, this is a 8-for-1 rights issue in which a hostile acquirer can not participate.”
Liberty Media and Murdoch family interests would be excluded from triggering the rights issue. If the plan is exercised, it would dilute Liberty to about 2 percent of the voting stock.
Mr. Malone took options to acquire additional stock in News Corp last week after the group completed its re-incorporation from an Australian-domiciled group to a U.S.-listed group.
The change in domicile forced Australian fund managers to liquidate part of their News Corp holdings, acquired on Liberty's behalf by Merrill Lynch under a swap arrangement in which Liberty can either acquire the stock or exchange existing non-voting shares in News Corp for voting stock by April next year.
Liberty Media declined to comment on the poison pill. But industry analysts warned that News Corp's action would be seen as defensive.