Rupert Murdoch is a man who is used to getting what he wants and the move to a US domicile is no exceptionas his giant memorandum reveals.
The great debate over Rupert Murdoch’s ambition to leave Australia and consolidate his interests in the United States is underway following Federal Court approval today of the calling of meetings to consider the proposals and the release of a huge information memorandum, which argues very strongly in favour of the day (as was to be expected).
See the announcement of the approval here. In it News Corp directors male it clear that any defeat of the proposal to move the company’s domicile to the United States will not end the process.
In the dense 374 page document and discussion of the proposals, which include the controversial Queensland Press shuffle involving the Murdoch family interests, News Corp directors said that if the proposals are rejected next month, they will return to a number of ideas that were rejected in the search for the ideal shaped transaction and outcome. See the memorandum here.
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These include some sort of dual listed or twin publicly quoted companies in Australia and the US, or variations of those. Two new holding companies or a new US-based company to make a bid for News Corp.
There is a constant refrain that News, if it is to grow and expand, needs exposure to the huge US markets, with more involvement needed from US investors, which will be achieved by entering the S&P 500 index in the US.
The memorandum contains full explanations of the rationale for the move, the Independent Expert report on the Queensland Press transaction, and a host of other information.
There are numerous references to tax treatments and rulings obtained from tax authorities around the world, and opinions delivered to company by outside advisers.
As well, it also makes clear that News Corp US will still be covered the Australian foreign investment laws, including the controversial one-off limit of non-portfolio foreign investment to a maximum of 39% in News.
Throughout the report there are constant references to the rationale for the shift, that desire for greater exposure to the US, for greater levels of US shareholder involvement. The constancy of the mentions gives support to the directors’ comments on page 33 which reveal their determination to have another go if the proposals are defeated at the October 26 meetings in Adelaide:
“Directors considered several alternative transactions to accomplish the same goal of moving the company’s domicile to the US, while maintaining the same relative position of all shareholders, including the Murdoch Family.
“One such alternative was to create a new US holding company and a new Australian holding company, with News Corp becoming wholly-owned by these two public companies.
“Another alternative considered by the Directors was to create a new US company which would make an offer to exchange its shares for outstanding shares of News Corporation. These approaches were abandoned primarily because they would result in two public parent companies, a structure which was considered sub optimal.
“Other structures were also considered but were abandoned when the current structure was finalised and determined to be acceptable to all constituencies, and seen to accomplish all goals of the change in domicile.
“If the Reorganisation is not approved by Shareholders and Option holders, the operations of News Corporation and News Group will continue as before; however, the company is likely to revisit the concept of creating a new holding company in the US, which will be eligible for inclusion in the S&P 500, through one or more of these alternative structures.”
On the question of Australia’s foreign investment laws, the memorandum in part says:
“The Australian Government has adopted a foreign investment policy relating to metropolitan newspapers, which provides assistance in determining what acquisitions may be regarded as contrary to the national interest. Under that policy, no one foreign investor can acquire more than 25%, and no two or more foreign investors, together (whether they are associates or not) can acquire more than 30%, of the total issued capital of the relevant company as a “non-portfolio” investment (ownership by other foreign investors through “portfolio investments” is not counted towards this limit).
“Note, however, that the Government has previously modified this general policy in its application to News Corporation so that the limit is 39% of total issued capital for both any one foreign investor or any two or more foreign investors together (whether they are associates or not).
“The Australian Government has advised News Corporation that, if the Proposed Transaction is implemented, the 39% of total issued capital limit described above will continue to apply in relation to News Corp US. The investment by the Murdoch Family and their associates in News Corporation, which is approximately 14.15% of total issued capital, is “non-portfolio” and counts towards this limit.
“News Corporation understands that the Australian Government also regards the investment by Liberty Media Corporation in News Corporation, which is understood to be approximately 17.00% of total issued capital, to be “non-portfolio”. On this basis, the current aggregate “non-portfolio” investment in News Corporation as at the date of this Information Memorandum, as a percentage of total issued capital, is approximately 31.15%.”