Governance engagement case study by Metropolis Capital – News Corp
Picked for the Alliance Trust portfolio by Metropolis Capital as at 11 January 2023
Area of engagement
In 2020, News Corp, a major media conglomeration and investment for Metropolis Capital, was continuing to use a controversial stockholder rights agreement or ‘poison pill’ provision. Such a provision could potentially entrench the current board and work against future investors.
Although this provision had significant implications for the company and its shareholders’ interests, this poison pill had never been voted on or agreed to by the shareholders themselves.
Metropolis failed to see a sound justification for the provision. So, to express its objection, it voted against the News Corp board’s recommendation to re-elect the Chairman of the Governance Committee. As he’d been in the position during the last time the issue was debated internally, Metropolis felt this was a proportional initial response – rather than voting against the entire board.
Although Metropolis didn’t win this vote, it continued to voice its concerns with News Corp and its board.
In March 2021 Metropolis learned that the poison pill would be up for reconsideration in June of that year. Not satisfied with the board’s previous determination, at this point it escalated the issue. It let News Corp know, both in person and in writing, that if it extended the provision, Metropolis would vote against all board members next year.
Outcome
Following Metropolis’ continued dialogue with the company, News Corp announced it had terminated its poison pill provision on 22 September 2021. Moreover, it was confirmed that Metropolis’ letter and assertive action were a consideration for the board when it came to discussing the stockholder rights agreement, indicating that it had a meaningful impact on their decision.
This information is for informational purposes only and should not be considered investment advice. Past performance is not a reliable indicator of future returns. The views expressed are the opinion of the Manager and are not intended as a forecast, a guarantee of future results, investment recommendations or an offer to buy or sell any securities. The views expressed were current as at May 2023 and are subject to change. Past performance is not indicative of future results. A company’s fundamentals or earnings growth is no guarantee that its share price will increase. You should not assume that any investment is or will be profitable. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
TWIM is the authorised Alternative Investment Fund Manager of Alliance Trust PLC. TWIM is authorised and regulated by the Financial Conduct Authority. Alliance Trust PLC is listed on the London Stock Exchange and is registered in Scotland No SC1731. Registered office: River Court, 5 West Victoria Dock Road, Dundee DD1 3JT. Alliance Trust PLC is not authorised and regulated by the Financial Conduct Authority and gives no financial or investment advice.
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