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News Corporation Secures Financial Flexibility with Limited Voting Preference Share Issue

Strategic Insights

— 1 min read

News Corporation, led by Rupert Murdoch, is poised to tap into the financial flexibility needed to pursue strategic alliances with telecommunications and media companies. The company will issue limited voting preference shares, offering shareholders a more attractive dividend return and paving the way for the potential raising of billions of dollars in capital. The move is aimed at ensuring strong demand on the sharemarket for the new securities, allowing News to make strategic partnerships without ceding control.

Key Takeaways:

  • News Corporation will issue one limited voting preference share for every two ordinary shares, with each pref share entitled to an annual preferred dividend of 7.5 cents.
  • The new securities are designed to attract strong demand on the sharemarket, enabling the company to raise large amounts of capital without losing voting control.
  • News Corp executive vice president Arthur Siskind stated that the plan is to raise a significant amount of capital without diluting voting power, with no immediate plans to do so but leaving the option open for the future.
  • The issue of limited voting preference shares in 1990 and 1991 was approved by the Australian Stock Exchange, but ultimately not used, instead the company sought to issue super-shares with additional voting rights.
  • Institutional shareholders were wary of the original plan, fearing it would entrench the Murdoch family's control, a sentiment that may still be present.
  • News Corp's large debt level and Mr. Murdoch's aversion to issuing ordinary shares constrain the company's ability to pursue opportunities in the media and telecommunications industry.

Statistics:

  • News Corporation will issue one limited voting preference share for every two ordinary shares.
  • Each pref share is entitled to an annual preferred dividend of 7.5 cents.
  • The current annual dividend on ordinary shares is 3 cents a share.
  • Ordinary shares are currently trading at $8.57.
  • The planned issue of pref shares brings the total number of potential shares in circulation to some $4 billion dollars or more.
  • News Corp's debt level is substantial, constraining its ability to pursue new opportunities.

Sources:

  • Bloomberg Business News
  • Australian Stock Exchange (ASX)
  • News Corporation (2003, January 17). Reliance on shareholder approval for the issue of limited voting preference shares.

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