BSkyB facing revolt from its investors

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Rupert Murdoch, whose News Corporation faces legal action from institutional investors for its failure to honour a pledge on its “poison pill” takeover defences, is facing another possible revolt among shareholders of BSkyB, the satellite television group he chairs.

Mr Murdoch is in London this week to attend a board meeting for BSkyB. The board is likely to discuss a proposed share buy-back, which will be put to shareholders in November. However, Hermes, the UK fund manager, has written to the pay-TV group, warning that it will vote against the plans.

Hermes is one of the 12 large pension and investment funds suing News Corp for extending its poison pill – adopted to prevent John Malone, the media investor, from increasing his voting stake beyond 18 per cent – for at least another two years.

Last year, News Corp said a poison pill plan adopted without prior shareholder approval would expire after one year.

Hermes is angered by News Corp’s actions and says it can no longer trust it as the leading shareholder of BSkyB. Institutions have been wary of corporate governance issues at BSkyB, and of its relationship with News Corp, which owns 37 per cent of the satellite TV group.

Paul Munn of Hermes, said: “We’ve supported BSkyB’s programme of buy-backs in the past on the basis that News Corp wouldn’t exercise its voting powers. We’ve relied on that undertaking, but now we don’t really feel that undertaking is worth its while.”

BSkyB is seeking permission for the buy-back at its annual meeting next month. It is requesting shareholders vote for the exemption to the Takeover Code provision that would force News Corp to bid for BSkyB and says News Corp’s voting rights will be capped at 37 per cent.

Hermes said if News Corp put the poison-pill decision to a vote, it would reconsider its position on the buy-back.

But BSkyB insists it is an independent company and objects to Hermes’ claims. “There are no grounds for Sky to be used as a proxy for issues surrounding News Corp,” said BskyB.

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