Starboard Value Proposes Major Changes for News Corp Structure
Starboard Value Takes Aim at News Corp's Share Structure
Activist investor Starboard Value is stepping into the spotlight by challenging Rupert Murdoch's influence over News Corp A (NASDAQ: NWSA). The firm has submitted a resolution aimed at dismantling the dual-class share system that provides Murdoch with disproportionate voting power, as reported by multiple sources.
The Impact of Dual-Class Shares
News Corp's dual-class arrangement has been pivotal in maintaining Murdoch's substantial control over the media giant. He holds 40% of the voting shares while owning just about 14% of the company’s total equity. This structure has been designed to fortify Murdoch's leadership despite ongoing debates about its fairness and effectiveness.
Starboard's Proposal and Its Motivation
Starboard's resolution, which is non-binding and seeks to alter the company's governance, reflects their belief that News Corp is undervalued and could capitalize significantly by restructuring its assets. The activist investor posits that a separation of Dow Jones from the real estate sector could potentially yield over $7 billion in value.
Current Stake and Voting Challenges
As of June 30, Starboard owned approximately 7.2 million Class A shares and 8.7 million Class B shares in News Corp, which amounts to around 1.9% of the total equity. However, there may be strategic efforts to prevent this resolution from reaching a vote in the company's upcoming annual shareholder meeting.
Historical Context of Shareholder Activism
This move is not unprecedented. News Corp has faced various challenges concerning its corporate structure in recent years. Just last year, Murdoch walked back on plans to merge News Corp with Fox Corp due to shareholder resistance, highlighting the ongoing scrutiny and debate surrounding the company's governance.
The Influence of Institutional Investors
It's important to understand that the conversation around dual-class shares is part of a broader dialogue about governance in large corporations. Institutional investors are increasingly advocating for more equitable share structures that provide all shareholders with a voice in major company decisions, moving away from systems that favor certain groups.
Frequently Asked Questions
What is Starboard Value's main goal with the proposal?
Starboard Value aims to eliminate News Corp's dual-class share structure, thereby redistributing voting power among shareholders.
How does the dual-class structure benefit Rupert Murdoch?
This structure allows Murdoch to maintain significant control, holding 40% of the voting power while owning only 14% of the equity.
How many shares does Starboard own in News Corp?
Starboard owns approximately 7.2 million Class A shares and 8.7 million Class B shares, totaling about a 1.9% stake in the company.
Has News Corp faced similar challenges in the past?
Yes, News Corp has previously faced calls for restructuring and has seen proposals for mergers that were ultimately abandoned due to shareholder opposition.
What potential value does Starboard believe can be unlocked?
Starboard believes that separating Dow Jones from News Corp's real estate division could unlock more than $7 billion in asset value.
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