Murdoch protects News Corp from bids with poison pill plan

Rupert Murdoch moved swiftly yesterday to head off any potential threat from his fellow media tycoon John Malone by setting up a "poison pill" defence for News Corporation against any attempted takeover.

Rupert Murdoch moved swiftly yesterday to head off any potential threat from his fellow media tycoon John Malone by setting up a "poison pill" defence for News Corporation against any attempted takeover.

Investors, particularly those in Australia, were left stunned as Mr Murdoch took advantage of the company's already controversial change of domicile, from Adelaide to Delaware in the US, to set up the controversial defence mechanism.

News Corp was reacting to the news, which emerged last week, that Mr Malone's Liberty Media, a US group, had entered into a deal that could see the company acquire 8 per cent of News Corp's voting shares, to add to the 9 per cent of the voting shares it already owned.

News Corp, chaired by Mr Murdoch, yesterday unveiled a "rights plan" that means that if any party acquires 15 per cent or more of the company's voting shares, all the other shareholders would be able to buy up to $80 worth of shares at half-price for every share already owned.

This would impose massive dilution on any investor which acquires15 per cent or more of News Corp, which has only just completed its change of domicile and main listing to the US. At the current share price of about $17.60, the scheme would mean a 9-for-1 rights issue in which a hostile acquirer could not take part.

The Liberty holding as it stands, including its option over the extra shares, would not trigger the plan, News Corp said. But any additional acquisitions by Liberty would trigger the controversial share issue, it said.

Mr Murdoch's family owns almost 30 per cent of News Corp's voting shares. Liberty has offered no reason for increasing its stake. In the past, 63-year-old Mr Malone has been an ally of Mr Murdoch.

There have been rumours that Liberty may make a bid for News Corp, but this is considered improbable. More likely, analysts believe, is that Liberty wants to acquire some assets from News Corp and it could use the News Corp shares to pay for them.

Jake Balzer, an analyst at Guzman & Co in the US, said Mr Murdoch and Mr Malone were serial deal-makers. "Liberty knows that, by having more of the voting shares, they'd have a little more leverage with News Corp," Mr Balzer said.

Liberty owns television content businesses, including the QVC shopping channel and half of the Discovery Channel.

There is also talk that Mr Malone is positioning himself for the moment when Mr Murdoch eventually retires or dies. Mr Murdoch has made clear that he expects one of his two sons, Lachlan and James, to inherit his crown.

Last week, when it was announced that Liberty had options over more News Corp shares, Mr Murdoch, 73, the chairman of News Corp, claimed to be relaxed about it, saying: "I think it's an endorsement of the company... I'm not losing any sleep over it."

But the language used by News Corp yesterday was aggressive. "This action [Liberty's shares deal] was taken without any discussion with, or prior notice to, News Corporation. For this and other reasons the company has put in place a Rights Plan to protect the best interests of all shareholders," Mr Murdoch's company said.

Ian Ramsay, a corporate law expert at Melbourne University, said: "The type of takeover defence adopted by Murdoch is almost unheard of in Australia, but is not uncommon in the United States."If Mr Malone, 63, decided to challenge the legality of Mr Murdoch's defence strategy, the case would be heard in the Delaware courts, where it is likely to be upheld, Mr Ramsay said. The weaker protection available for shareholders in the US, compared with Australia, was the reason that many investors had voiced concerns about News Corp's change of domicile.