A group of institutional investors has filed a court action against News Corp's board, alleging that the company paid too much to acquire production house Shine Group.

The complaint, lodged in News Corp’s legal home base of Delaware, alleges that the £290 million acquisition was driven by News Corp founder Rupert Murdoch and his desire to bring his daughter and Shine boss Elisabeth Murdoch back into the company.

“Indeed, Murdoch did not even pretend that there was a valid strategic purpose for News Corp to buy Shine,” the suit, lodged by The Amalgamated Bank, Central Laborers Pension Fund and New Orleans Employees’ Retirement System, said.

“Rather, Murdoch publicly proclaimed that his purpose in entering into the transaction was to bring Elisabeth back to the family business – News Corp – and to put her on News Corp’s already conflicted and dominated board of directors. Now that the prodigal daughter is back in the News Corp fold, she vies with her brothers, board members James Murdoch and Lachlan Murdoch, for control of Rupert Murdoch’s global media dynasty.”

The suit comes at a sensitive time as Murdoch struggles to keep the News Corp empire under control after revelations that its British newspapers, led by the recently-closed The News of the World, had engaged in widespread illegal spying.

The suit argues that Shine’s last disclosed audited earnings before interest, tax, depreciation and amortisation (EBITDA) in 2009 – £28.40 million – and enterprise value of £372 million, makes the deal more than twice as costly as other recent similar transactions.

Earlier this month, SBS's director of television and online content, Matt Campbell, announced that he would become managing director of Shine Australia and New Zealand after local bosses Carl and Mark Fennessy were promoted to global roles within the reality TV production house.

The Fennessy's set up Shine Australia in January 2010 after leaving FremantleMedia Australia. Their shows are regularly amongst the top-rated in Australia including MasterChef, Junior MasterChef and The Biggest Loser.
 


Source: Delaware Chancery Court shareholder derivative and class action complaint

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