As RBR-TVBR predicted when the deal was announced, some people have raised an eyebrow over News Corporation’s $673 million agreement to buy Shine Group, headed by News Corporation CEO Rupert Murdoch’s daughter, Elisabeth. Some of those with raised eyebrows are shareholders and they have sued to block the deal.
Almagated Bank of New York, which is the trustee for several pension funds, and the Central Laborers Pension Fund filed suit in Delaware Chancery Court, charging that the deal is a clear case of nepotism, that the price is too high and that acquiring Shine “provides no material benefits” to News Corporation. They claim that the Murdoch family is running the public company as a private fiefdom and want to court to block the purchase.
As you would expect, News Corporation’s official response is that the lawsuit has no merit.
At the time the long-rumored deal was announced, News Corporation COO Chase Carey, who is not a member of the founding family, declared that “Shine is a leader in the global television production business with a proven track record of developing hit shows and new formats worldwide.” The company is the largest independent TV production company in the UK. Its hit reality shows in the US include “The Biggest Loser” on NBC, “MasterChef” on Fox and “One Born Every Minute” on Lifetime. On the scripted side, it owns “The Office” on NBC, “Ugly Betty” which aired on ABC and “The Tudors” on Showtime.
Elisabeth Murdoch launched Shine in 2001 and quickly began to have success in producing television programs. She greatly enlarged the company in 2008 with a deal to acquire Reveille for nearly $200 million.
Elisabeth Murdoch reportedly owns a 53% stake in Shine, so she is in line to receive a little over half of the cash from the sale after the company’s debt is paid off. Shine is privately owned, so its debt leverage is not publicly known.
RBR-TVBR observation: To claim that Shine “provides no material benefit” to News Corporation is pretty far-fetched. On the contrary, it seems to fit right into the company’s worldwide TV empire. As to whether the price tag is too high, you can bet that News Corporation’s top brass foresaw this type of lawsuit and have lots of independent valuation evidence to justify the amount being paid. The lawsuit seems unlikely to prevent the acquisition from closing as scheduled the end of this month.