Rupert Murdoch, Chair of News Corporation (corporate parent of Faux News) has had trouble with his shareholders lately. His recent annual meeting was a contentious affair, with 16% of his shareholders (a big number in shareholder elections) voting against a
poison pill takeover defense Murdoch has put into place.
Now Murdoch is having trouble in his effort to consolidate his control over British Sky Broadcasting (known to friend and foe alike as BSkyB). Couldn't be happening to a nicer guy.
More below the fold...
As the Financial Times reports (sorry, I just have print and the online is a subscription service):
Rupert Murdoch suffered his second shareholder protest vote in a month yesterday as British Sky Broadcasting, the UK satellite broadcaster he chairs, narrowly avoided defeat on a controversial share buyback proposal
FT reports that the opposing vote was 46%. Now 46% would be a landslide loss in many political elections, but in a shareholder vote, 46% opposed amounts to open revolt. After all, shareholders invest in the expectation of making money, and so long as they feel the people in charge are likely to make money for them, they generally go along with them.
Believe it or not, making money, at least for shareholders, is where Murdoch is having problems. Shares of News Corp (NWS) are down about -21.5% so far this year; the general market is a little better than flat. BSkyB isn't in much better shape; it recently reported an unexpected increase in cancelled subscriptions, and its shares are under pressure too.
The idea of Murdoch's buyback proposal is to use BSkyB's company funds to buy back BSkyB shares. Share buybacks aren't unusual; in fact investors usually regard them as a good thing. They often perform much the same function as dividends: returning cash to shareholders, who are the ones that own the cash, after all. In BSkyB's case, there's another game afoot, though. News Corp now owns 37% of BSkyB, and the buyback would target shares in the other 63%. By absorbing some of the non-Murdoch controlled shares, the buyback would increase News Corp's stake in BSkyB to more than 39%, according to the FT. So the proposal isn't just to return cash to shareholders. It's to use the cash to help Murdoch consolidate his control over BSkyB. Shareholders have to approve these things, and BSkyB's shareholders did, but just barely. It's the just barely part that makes the story interesting.
A group of BSkyB directors allied with Murdoch complained about the institutional investors that are fighting him on this buyback. They wrote:
[The institutions] seemed to us to believe that circumstances relating to another company, News Corp, in another jurisdiction [the US] with a different system of corporate governance were relevant. We believe that this was misguided.
Wait a minute. This isn't a legal proceeding, where it's appropriate to use extreme caution in applying precedents from foreign jurisdictions. This is about Murdoch's track record. The troubles he's having at News Corp absolutely are relevant.
Murdoch's response: He assures investors that BSkyB is on track to have 10 million subscribers -- by 2010. Yeah, and John Snow says we're still on track to cut the deficit in half by then, too.