Murdoch faces $1bn legal scrap after sale of DirecTV assets

Murdoch faces $1bn legal scrap after sale of DirecTV assets
By Katherine Griffiths and Miranda Mclachlan
24 October 2004
http://news.independent.co.uk/business/news/story.jsp?story=575366

News Corporation is facing a $1bn (£550m) lawsuit alleging the media
empire flouted corporate governance when it agreed to sell the Latin
American assets of DirecTV in a deal in which Rupert Murdoch's company
is both buyer and seller.

Cisneros, the giant Venezuelan media group, which is a shareholder in
DirecTV Latin America, is accusing News Corp of grossly underestimating
the value of the assets.

Cisneros also accuses News Corp of "tortious interference" in the way
DirecTV was run, and of participating in "breeches of contractual and
fiduciary duties" between the company and its shareholders.

Cisneros, which used to own London's Paternoster Square and also
attempted to buy Premier League football team Tottenham Hotspur, lodged
the lawsuit this week in a Florida court against both News Corp and DirecTV.

According to Cisneros, which owns 14 per cent of DirecTV Latin America,
the business is worth more than $1bn. It says the sale of the assets to
News Corp's minority Latin American partners, Sky LA, put a price tag of
just $217m on the business.

News Corp is on both sides of the transaction because it bought a 34 per
cent stake in DirecTV last year. DirecTV owns 86 per cent of Latin
American assets now being sold. News Corp is also a large investor in
Sky LA Partners.

Cisneros contends News Corp is pushing the sale through because its 2003
acquisition of DirecTV breeched its non-compete agreements with Sky LA.
The lawsuit says by consolidating the two, News Corp does not have to
pay any fines or find alternative expensive solutions.

Meanwhile, a separate part of Mr Murdoch's empire is in discussions with
the US's Federal Communications Commission, whose rules prevent media
companies from owning TV and print media in the same area.

News Corp has applied for a waiver so that it can continue to own both
the New York Post and New Jersey's WWOR-TV station. A previous waiver
ran out last year. A News Corp spokesperson said the company and Wall
Street were "very comfortable" with terms of the sale of the Latin
American assets. It added that in applying for a waiver over its
businesses in the New York area, "we have done everything we had to do".

The case comes at an awkward time for Mr Murdoch, who is trying to move
News Corp's incorporation from Australia to the US, where shareholders
have weaker legal rights. To persuade shareholders to back the move,
News Corp's leader has undertaken to maintain their rights at levels
guaranteed by Australian laws.