American investors are suing Rupert Murdoch’s News Corp. over its decision to buy his daughter’s TV company Shine, claiming it is such a poor deal they are ”paying for nepotism.” New York-based Amalgamated Bank, representing several funds that hold 1 million shares, and the Central Laborers Pension Fund of Illinois said in filings to Delaware Chancery Court that Murdoch was treating the company “like a wholly-owned candy store,”  that the $675 million deal makes no business sense and that the media giant is paying far more for Shine than it’s worth.

But the legal protests appear unlikely to scupper the deal, which is expected to close within the next few weeks. The takeover is not large enough to require News Corp. shareholder approval; it only needs the approval of News Corp.’s audit committee as well as each company’s respective boards. News Corp. has already dismissed the lawsuit as being “without merit” and added that Shine is “a very attractive business.”

The suit alleges that News Corp.’s board failed to question or challenge Rupert Murdoch. In a stinging attack, the investors’ lawyers allege, “In addition to larding the executive ranks of the company with his offspring, Murdoch constantly engages in transactions designed to benefit family members.”

According to the complaint, Elisabeth Murdoch will receive $320 million in return for her 53% stake in Shine — whose portfolio includes Reveille’s The Biggest Loser and The Office — and still remain CEO and chairman. Amalgamated said in its filing: “Once the prodigal daughter is back into the News Corp. fold, she will vie with her brothers, board members James Murdoch and Lachlan Murdoch, for the position of successor to Rupert Murdoch’s global media dynasty.”

Shareholders also argue that the Shine deal will increase News Corp.’s debt load, making its ongoing takeover of UK pay-TV broadcaster BSkyB more difficult to swallow. On Monday, the British government will end its public consultation on the News Corp/BSkyB deal, which rival newspaper groups are desperate to derail.

Addie DeWitt
4 years
Couldn't have said it any better.
werbert
4 years
There is a gigantic difference between Murdoch and Deadstne. Deadstone owns 79% of the voting shares so...
financeguy
4 years
ull: Fair point. What cash flow multiple are you speaking of and what precedent deals do you...

News Corp.’s buying Shine has already claimed one scalp: Fox Look, the U.S. studio’s TV formats distribution arm, is to be closed following Shine’s acquisition. Shine is expected to take over running its international unscripted formats business.