News Corporation says it discovered that approximately 36% of the company’s Class B stock is held by foreign owners. That’s a problem because FCC rules limit foreign ownership of broadcast licensees to 25%. The foreign ownership tally was reduced to only 22% on issues where Class A and Class B holders vote. But, in order to comply with US ownership rules, News Corporation immediately suspended half of the voting rights of its Class B stock held by non-US citizens. However, that 50% cut in voting rights won’t apply to any vote where the two classes of stock get to vote together.
“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,” News Corporation said in a statement Wednesday (4/18).
The Murdoch Family Trust and CEO Rupert Murdoch (a naturalized US citizen who was born in Australia) have entered into an agreement with the company not to do anything to increase their voting power because of 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 stated.
News Corporation, which was originally an Australian company before reincorporating in the US, has always had a significant number of non-US shareholders. The biggest, though, is Saudi billionaire Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud, with about 7%. He has long been a confidant of Murdoch and supporter of his management, so he’s won’t likely be upset by the 50% voting suspension.
RBR-TVBR observation: Rule number one: “Protect the license.” As a practical matter this shouldn’t have any impact on how News Corporation is run, but it is vital for the company to stay in compliance with the FCC rules.