News Corp., the media company controlled by Rupert Murdoch, won court approval for a $450-million deal to settle lawsuits alleging that investors were shortchanged in the buyout of its Fox Entertainment Group unit.
News Corp. initially offered 1.9 of its shares for each Fox share. After investors sued and a Fox board committee agreed to examine the bid’s fairness, News Corp. executives agreed to raise the offer to 2.04 shares for each Fox share.
Delaware Chief Chancery Court Judge William B. Chandler III approved the deal, saying it was an appropriate way to resolve complex litigation over the January bid.
Chandler also approved $5.2 million in legal fees and expenses for shareholders’ lawyers. News Corp. agreed to pay the money, the judge said.
“We believe the settlement is fair because the value for shareholders is far greater than could have been derived from continuing the litigation,” said Steven Schulman, a New York-based attorney with Milberg Weiss Bershad & Schulman who represented Fox Entertainment shareholders.
Purchasing the Fox stock it didn’t own gave Murdoch’s company all of the unit’s $12.2 billion in annual sales and complete control of assets including the 20th Century Fox film studio, Fox News Channel and 35 U.S. television stations.
Fox accounted for 69% of News Corp.'s $1.5 billion of net income for the fiscal year ended June 2004.
Andrew Butcher, a spokesman for New York-based News Corp., which also owns newspapers such as the New York Post and the Times of London, said he couldn’t comment. Shareholders, including a Louisiana teachers’ pension fund, had filed 18 suits alleging they were shortchanged in the buyout.
Fox investor Janice Allen alleged that News Corp. directors, including Murdoch and Chief Operating Officer Peter Chernin, “breached their duty of loyalty” to shareholders by accepting the original offer. Allen described the bid as “unconscionable, unfair and grossly inadequate.”
Schulman told Chandler that shareholders’ lawyers had been pushing to block the Fox buyout when News Corp.'s lawyers indicated they might be willing to settle.
Investors “held a good hand in the litigation,” Schulman said.
Concerns that News Corp. still might prevail prompted investors’ lawyers to recommend resolving the case, he said.