March 17, 2011
I just bought my daughter's company...
...and what are you going to do about it?
Well, sue you ... of course! Reuters and Bloomberg are reporting that shareholders have filed a suit challenging News Corp's recent acquisition for $675 million of Shine, a company owned by Rupert Murdoch's daughter. The complaint alleges that Murdoch treated News Corp like the "family candy store" in doing the deal. "Paying for nepotism" is a pretty hefty charge and not a run-of-the-mill merger challenge. Typically, challenges are brought against the target board. Here, the challenge is brought against the acquiring board. Acquirers in merger transactions generally get the protection of business judgment. The sets of facts that generate more intense scrutiny from the courts of acquiring boards are extremely limited and really the stuff of law school exams. For example, let's say you controlled a company and you used your control position to have the company acquire a firm that belongs to your daughter at an above market price ... wait a minute ...
Entire fairness. Look it up.
Oh, and because this is a loyalty question, there's no protection from 102(b)(7) if this goes the wrong way for directors. They could be on the hook personally for this.
Update: Here the complaint.
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