News Corp sued over ‘nepotistic’ Shine buy-out

News Corp shareholders are suing Rupert Murdoch in a US court for purchasing his daughter’s Shine Group in a deal they say amounts to nepotism.

The Amalgamated Bank of New York and the Central Laborers Pension Fund filed for damages on Wednesday after News Corp last month agreed a US$675m deal to purchase Elisabeth Murdoch’s London-based prodco.

Amalgamated say the deal could put at risk other purchases being targeted by News Corp including the controversial buy-out of BSkyB – recently approved in principal by the British government.

But sources close to the Shine deal say the allegations are unfounded, that a fair price has been agreed, and that more than one potential suitor for the company was considered.

Elisabeth Murdoch will join the News Corp board as part of the deal but the lawsuit filed at Delaware Chancery Court said: “In short, Murdoch is causing News Corp to pay US$675m for nepotism.”

According to the complaint Elisabeth Murdoch will receive US$320m in return for her 53% stake in Shine – responsible for hit TV series Hustle and Spooks – but will remain as the company’s chairman and chief executive.

“Once the prodigal daughter is back into the News Corp fold, she will vie with her brothers, board members James Murdoch and Lachlan Murdoch, for the position of successor to Rupert Murdoch’s global media dynasty,” Amalgamated said in the complaint.

“In addition to larding the executive ranks of the company with his offspring, Murdoch constantly engages in transactions designed to benefit family members.”

Amalgamated go on to say that the deal could jeopardise the purchase of BSkyB as it would increase the amount of debt the company needs to take on to complete the purchase making it unpalatable.

News Corp declined to comment beyond issuing a statement from a spokesman saying: “We believe these charges to be completely without merit.”

The British government will on Monday draw to a close its latest consultation on the News Corp-BSkyB buy-out under intense pressure from rival media companies including Guardian Media Group, Associated Newspapers, Trinity and Telegraph Media Group to renege on its expected approval, pending a sell-off of Sky News.

Earlier this week, C21 revealed that Fox Look, the News Corp-owned US studio’s fledgling formats distribution outfit, is to be closed down following the acquisition of Shine, with the latter expected to pick up its responsibilities.