GLOBAL - A band of institutional investors, including pension funds are rallying to revolt against satellite broadcaster BSkyB's plans to buy back up to 5% of its shares this month.
The revolt is part of a dispute with Rupert Murdoch’s News Corp over its plans to extend “poison pill” anti-takeover provisions.
BSkyB’s plan would raise News Corp’s stake in the company from 37.2% to more than 39% and would normally force News Corp to make a full takeover bid. As a result, BSkyB is proposing a waiver of Rule 9 in the take-over code, which exists to prevent any large shareholder from obtaining a controlling position without paying a premium to other shareholders.
Colin Melvin (pictured), director of corporate governance, at Hermes Pensions Management, said Hermes would vote against the buy back proposal at BSkyB’s shareholder meeting on 4 November.
“We have had reassurances from BSkyB in the last two years that they would not exercise the extra votes that they obtain through this process,” he said.
“Having discussed this with them, we are now not convinced that the reassurances they’ve given us are sufficient and we’re going to vote against the Rule 9 waiver.”
A spokesperson for the Association of British Insurers added: “We have put [the proposal] on a red top (the most serious level of concern). The concern is News Corp’s creeping control in BSkyB. We also feel that BSkyB has not sufficiently considered alternative forms of returning capital to shareholders, for example via a special dividend.”
Given News Corp, whose chairman and CEO is Rupert Murdoch, cannot exercise voting rights on its 37% holding in the company, there is a strong chance BSkyB’s resolution will fail, provided other investors follow suit.A spokesman for BSkyB said Sky’s board consulted widely with shareholders before introducing the proposal.
“If the buy back proposals are approved, News Corp’s voting rights will be capped at the current level of 37.2%. This is a legally binding contract,” he added.
Eleven pension funds worldwide have launched legal action against News Corp over its alleged failure to uphold a promise to seek shareholder approval for any extension of its “poison pill” beyond 12 months. The agreement was part of a series of corporate governance improvements agreed to by the firm in order to win investor support for its transfer of domicile from Australia to the US.Murdoch has since announced a “poison pill”, due to expire on 8 November, will be extended for two years.
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