Last updated: May 24, 2013 10:45 pm

News Corp adopts ‘poison pill’ share plan to protect divisions

News Corp has adopted a “poison pill” to prevent challenges to Rupert Murdoch’s control of his family media empire , as it splits into separate entertainment and publishing businesses.

The group named directors for the two new boards on Friday and announced that the division would happen on June 28. It also unveiled a plan to let existing shareholders – including the Murdoch family – buy new shares at a 50 per cent discount if anybody were to buy 15 per cent or more of either company’s class B voting shares.

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The plan, effective for a year, would allow the Murdochs to dilute anybody attempting to take control of either company in a period when, News Corp noted, there may be heavy trading in both stocks. That should reduce the risk of challenges such as that mounted by John Malone in 2004, when he began building a 16.3 per cent voting stake in News Corp. Mr Malone ultimately traded his shares for Mr Murdoch’s interest in DirecTV.

Separately, in a regulatory filing on the eve of a US holiday weekend, News Corp added that it would take an non-cash impairment charge of $1.2bn-$1.4bn against its publishing assets.

The decision reflects weak advertising trends, particularly in its Australian newspapers but also in some US businesses. Since Mr Murdoch’s $5.7bn acquisition of Dow Jones in 2007, it has announced writedowns and impairment charges of almost $7bn against its publishing business.

The poison pill will also prevent the Murdoch family from raising its 39.4 per cent stake in either company for a year, unless another investor breaches the 15 per cent threshold.

“The question is, with a dual-class structure, why do you need this,” said Charles Elson, director of the Weinberg Centre for Corporate Governance at the University of Delaware. “It’s belt and suspenders.”

“It’s one more tool to entrench management,” said Laura Campos, director of shareholder activities at the Nathan Cummings Foundation, which holds under 3,700 shares in News Corp and has campaigned for governance reform at its past annual meetings.

Mr Murdoch and his sons, Lachlan and James, will be the only News Corp directors to retain seats on both boards when the company spins off its newspaper, Australian television and online assets, dubbed “new” News Corp, while its television channels and film studio will be renamed 21st Century Fox.

Mr Murdoch’s daughter, Elisabeth, who has distanced herself from the group ever since “delaying” her planned nomination as a News Corp director in August 2011, will not sit on either board.

Lachlan and James Murdoch have been targeted by governance campaigners since phone hacking investigations shook the company two years ago, although the protest vote at last year’s annual meeting was much smaller than in 2011.

21st Century Fox will add three new directors: Delphine Arnault, deputy general manager of Christian Dior Couture and daughter of LVMH founder Bernard Arnault; Jac Nasser, chairman of Anglo-Australian miner BHP Billiton, former Ford Motor chief executive and recent BSkyB director; and Robert Silberman, executive chairman of Strayer Education and former assistant secretary of the US Army.

The new News Corp board will include John Elkann, the Fiat chairman and Agnelli family heir; Ana Paula Pessoa, a former chief financial officer of Globo in Brazil and partner at Brunswick Group, the London-based public relations firm; and Masroor Siddiqui, a former partner of The Children’s Investment Fund who last year co-founded Naya Management, an investment firm.

“It’s still pretty much his company, his board,” Mr Elson said.

Shareholders will receive one share of the new News Corp for every four News Corp shares as a stock dividend, the group said. Its board also approved a $500m share buyback programme for the new News Corp.

The split, announced last summer, has strongly lifted News Corp shares, which had already recovered from their plunge during the July 2011 phone-hacking crisis thanks to a $10bn share buyback.

“We continue to believe that the separation will unlock the true value of both companies and their distinct assets, enabling investors to benefit from the separate strategic opportunities resulting from more focused management of each division,” Mr Murdoch said in a statement.

Mr Murdoch will remain chairman and chief executive of 21st Century Fox, with Chase Carey as chief operating officer. He will be executive chairman at the new News Corp, with Robert Thomson as chief executive.

Existing News Corp directors joining the 21st Century Fox board include James Breyer, Dave DeVoe, Viet Dinh, Sir Rod Eddington and Alvaro Uribe. Those moving to the new News Corp include José María Aznar, Natalie Bancroft, Peter Barnes, Elaine Chao and Joel Klein.

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