News Corp. Holds Talks with Investors

Phone hacking scandal leaves large holders concerned about succession plans.

News Corp. Chief Operating Officer Chase Carey, reacting to the scandal over phone hacking at the News of the World tabloid, is holding discussions with some large investors over governance and other concerns.

The California State Teachers’ Retirement System, which held 3.86 million News Corp. Class A shares as of June 30, plans to meet with top officials soon, said Ricardo Duran, a spokesman.

“Calstrs is involved in the engagement process, which includes sending letters, holding conference calls and meetings, with News Corp. management,” Duran said in an e-mail. “Because this is delicate, we cannot say anything further about our efforts.”

The outreach by News Corp., owner of Fox Broadcasting and the Wall Street Journal, reflects investor concern over succession plans for Chairman and Chief Executive Officer Rupert Murdoch, the use of capital and family control of the company in the wake of the scandal, two people with knowledge of the situation said.

Carey, Murdoch’s second-in-command who also holds the title of president, and David DeVoe, the company’s finance chief, are conducting the briefings, according to a fund manager who wouldn’t discuss the matter publicly and isn’t planning to take part.

Julie Henderson, a spokeswoman for New York-based News Corp., declined to comment.

 

Meeting Request
The California Public Employees’ Retirement System, which was aware of the discussions, won’t be participating, said Brad Pacheco, a Calpers spokesman. The pension fund for state workers owns 5 million Class A nonvoting and 1.38 million Class B voting shares, according to Bloomberg data.

Last month, after the Guardian newspaper in the U.K. reported News Corp.’s now-defunct News of the World tabloid had hacked the voicemail of a murdered schoolgirl, the company hired consultant Sard Verbinnen & Co. to survey investors.

Since then, executives including Murdoch and his son James, News Corp.’s deputy chief operating officer, have faced questions about the accuracy of testimony they gave to a British Parliamentary panel investigating the hacking and the company’s response to it.

Investors led by Glenview, Illinois-based Wespath Investment Management, representing stockholders with 1.31 million News Corp. shares, requested a meeting with lead independent board member Roderick Eddington in an Aug. 5 letter.

Anita Green, a spokeswoman for Wespath, declined to say this week whether the investors would be meeting with management of News Corp.

 

Succession, Acquisitions
In an earnings call on Aug. 10, News Corp. addressed some of the investors’ concerns, including who might succeed Murdoch as CEO. Murdoch controls the company through ownership of almost 40 percent of the voting stock.

“I hope that the job won’t be open in the near future,” Murdoch said. “Chase is my partner. If anything happened to me, I’m sure he’ll get it immediately if I went under a bus. But in the end, succession’s a matter for the board.”

Carey, in turn, addressed possible acquisitions, saying the company “will focus on modest investments, those in the tens or hundreds of millions, not billions.”

Because of the scandal, News Corp. was forced to abandon its 7.8-billion-pound ($12.8 billion) bid for the 61 percent of British Sky Broadcasting Group Plc it doesn’t own.

 

Share Drop
The British law firm Harbottle & Lewis released letters on Aug. 16 that said Rupert Murdoch, 80, gave “inaccurate and misleading” statements to Parliament explaining why News Corp. had hired the law firm in 2007 to examine one phone-hacking allegation. Two former News of the World executives said they told James Murdoch in 2008 the practice was widespread, contradicting the younger Murdoch’s testimony to the panel.

News Corp. fell 63 cents, or 3.9 percent, to $15.56 at 4 p.m. in Nasdaq Stock Market trading. The Class A shares have declined 14 percent since the Guardian reported on July 4 that News of the World accessed the voicemail of murdered teenager Milly Dowler.

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