Nepotism claim takes Shine off Murdoch deal

Rupert Murdoch's News Corp is being sued by shareholders for the alleged "nepotism" of buying his daughter Elisabeth's television production company Shine for more than £400 million ($886 million).

The Amalgamated Bank of New York (ABNY) and the Central Labourers Pension Fund (CLPF), both shareholders in News Corp, have filed complaints accusing Murdoch of treating the business "like a wholly-owned family candy store".

The action surprised the company, which had considered the matter a done deal. As a trustee for several funds, ABNY holds about a million shares in News Corp and filed its complaint in Wilmington, Delaware. Illinois-based CLPF filed a separate complaint, demanding access to the News Corp books and records explaining the decision to buy Shine.

Lawyers for the bank said the News Corp board should have done more to ensure the deal was good value for shareholders.

"Although the transaction makes little or no business sense for News Corp and is far above a price any independent, disinterested third party would pay for Shine, it is unsurprising that the transaction was approved by News Corp's board.

"In addition to larding the executive ranks of the company with his offspring, Murdoch constantly engages in transactions designed to benefit family members."

ABNY said the Shine deal was a bid to further the "selfish" interests of News Corp's controlling shareholder at the expense of the company.

"The transaction violates the entire fairness standard both on the basis of price and process," it said. "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."

News Corp described the claim as "without merit".

ABNY's shares amount to only 0.003 per cent of News Corp stock.

News Corp says Shine, one of Britain's largest independent production companies, with a turnover of £396 million, is a "great fit" for the business and will increase its international reach.

The deal - which still has to go before News Corp's audit committee - is expected to pave the way for Elisabeth, 42, to take a seat on the board.

"Shine has an outstanding creative team that has built a significant independent production company in major markets in very few years, and I look forward to them becoming an important part of our varied and large content creation activities. I expect Liz Murdoch to join the board of News Corporation on completion of this transaction," Murdoch said after the deal was done..

His daughter expressed delight that Shine, which she founded in 2001 and which has a portfolio including Spooks and Masterchef, would be joining "such an extraordinary group of companies" as News Corp.

She said: "In a rapidly consolidating global TV industry, this alliance uniquely provides the conditions in which Shine Group can continue to lead and prosper. News Corporation is the partner that enables us to maintain our aspiration to be best in class," she said.

Murdoch aims to buy all shares he does not own in the satellite broadcaster BSkyB. Culture secretary Jeremy Hunt had controversially refused to refer the takeover bid to competition authorities, but Murdoch faces a period of tough negotiations with BSkyB's minority shareholders over the price of the 61 per cent of the company he does not own.

- Independent