UPDATE: News Corp has confirmed it has suspended the voting rights of a portion of class B common stock held by foreign shareholders. The Murdoch Family Trust and Rupert Murdoch have agreed not to vote, or provide voting instructions, with respect to a portion of their class B common stock during the suspension period to the extent that doing so would increase their percentage of pre-suspension voting power. See the release below.
PREVIOUS: According to the U.S. Communications Act, a broadcaster can’t have more than 25% foreign ownership. News Corp, which owns 27 TV stations, is said to have discovered that foreign investors’ voting stock has crossed the 25% cap. The company, which found the breach during a survey, is expected to suspend half the voting rights of class B voting shares held by non-Americans, The Wall Street Journal reports. Citing a person familiar with the situation, the newspaper says the rights will be suspended until News Corp is back in line with the regulations. This has happened before at News Corp. Both the company and Murdoch were originally Australian and Murdoch became a U.S, citizen in the 80s, which allowed him to purchase the TV stations. In 1995, the FCC waived a breach of foreign ownership on public interest grounds and the company since reincorporated as a U.S. entity, The Journal notes.
NEW YORK, NY, April 18, 2012 – News Corporation (NASDAQ: NWS, NWSA; ASX: NWS, NWSLV) today announced that in order to ensure compliance with U.S. law, it has suspended the voting rights of a portion of the Class B Common Stock, par value $0.01 per share (“Class B Common Stock”), held by stockholders who are not U.S. citizens (“Non-U.S. Stockholders”). The suspension will not impact the rights of Non-U.S. Stockholders of Class B Common Stock to receive dividends and distributions.
This suspension of voting rights allows the Company to remain compliant with applicable U.S. law governing holders of U.S. broadcast station licenses, which limits both ownership and voting power of corporations owning broadcast station licensees to no more than 25% by Non-U.S. Stockholders. This action secures the critical assets of News Corporation’s valuable television segment, representing the Company’s 27 owned-and-operated stations and the Fox Broadcasting Company, which together generated $4.8 billion in revenue and $681 million in operating profit in fiscal 2011.
Based on information currently available to the Company, the Board of Directors of the Company (the “Board”) has determined that approximately 36% of the Company’s Class B Common Stock is owned by Non-U.S. Stockholders; and the combined ownership of Class A Common Stock, par value $0.01 per share (“Class A Common Stock”) and Class B Common Stock by Non-U.S. Stockholders is approximately 22% of the combined outstanding shares of Class A Common Stock and Class B Common Stock. In order to comply with U.S. law and in accordance with Article IV, Section 5 of the Company’s Restated Certificate of Incorporation, the Board approved the immediate suspension of voting rights of 50% of the Class B Common Stock held by Non-U.S. Stockholders.
The suspension of voting rights will remain in place for as long as the Company deems it necessary to maintain compliance with U.S. law. However, it will not apply in connection with any vote on any matter on which holders of Class A Common Stock shall be entitled to vote together with holders of Class B Common Stock as described in the Company’s Restated Certificate of Incorporation.
The Murdoch Family Trust and K. Rupert Murdoch (together the “Murdoch Family Interests”) have entered into an agreement with the Company not to vote or provide voting instructions with respect to a portion of the shares of Class B Common Stock they own during the voting rights suspension period, to the extent that doing so would increase their percentage of voting power from what it was prior to the suspension.
Accordingly, after the suspension of voting rights, the aggregate percentage vote of the Murdoch Family Interests will remain initially at 39.7% of the outstanding shares of Class B Common Stock not subject to the suspension of voting rights.
The Company initiated a review of the foreign ownership of its common stock in connection with the regular preparation of its television station renewal applications. The Company expects to provide updated information on ownership of its common stock by Non-U.S. Stockholders no less frequently than as of the record date for each future stockholder meeting, and to revise the suspension of voting rights based on its ongoing monitoring of the level of foreign ownership.