News Corp. - Shareholder/Analyst Call
News Corporation (NWSA)
June 11, 2013 10:00 am ET
Executives
Keith Rupert Murdoch - Co-Founder, Executive Chairman, Chairman of the Media & Entertainment Arm and Chief Executive of the Media & Entertainment Arm
Presentation
Keith Rupert Murdoch
Good morning, ladies and gentlemen. If you'd all please be seated. I'm Rupert Murdoch, Chairman and Chief Executive Officer of News Corporation. It's my pleasure to welcome all of you to the Special Meeting of Stockholders of News Corporation. Before calling the meeting to order, I'd like to present some remarks about the proposed separation of News Corporation.
It was nearly a year ago when we set out to chart a strategic plan to unleash the true potential of our quite unparalleled portfolio of assets, brands and franchises. News Corporation's size and complexity, the result of the case of growth have made it difficult for investors to understand and therefore, properly value our company. We're confident that the separation will unlock the true value of our assets and create long-term value for you, our stockholders. Were also enhanced by management focus to bolster our financial and operational flexibility and enable us to respond more rapidly to fast evolving markets. I'm pleased to report that we are on track to effect the separation on June 28.
I'd like to recognize the enormous amount of work undertaken over the last year by our management team, our board and the rest of my colleagues at News Corp. to bring us to this place. I also like to express my appreciation to our stockholders for your attention to the matters outlined in our proxy. With the separation, we will launch 2 independent companies: Twenty-First Century Fox, the world's premier portfolio of media and entertainment assets; and the new News Corp., the largest news and information services regarded in the English-speaking world. Both companies will be uniquely positioned to execute on their strategic objectives and to lead their industries forward. I'm confident in the future prospects and the value that each will create for our stockholders.
I now call the meeting to order.
Before proceeding to the business of the meeting, I'd like to introduce members of our management team. On stage with me, our CFO and Director, Mr. David DeVoe; and our Group Counsel, Mr. Gerson Zweifach. In accordance with the company's bylaws, I hereby appoint Mr. Jim Raitt of American Election Services, LLC as the independent Inspector of Election for this special meeting.
This meeting is held pursuant to a notice of special meeting on stockholders mailed on or about April 30, 2013, to each record holder of a share of common stock on April 19, 2013. A list of holders of the company's common stock entitled to vote at this meeting, based on our record date at April 19, 2013, has been available at the company's headquarters for the past 10 days, and is available at the meeting for examination by any stockholder desiring to do so.
All documents concerning the call and notes of this meeting are available here today and will be filed with the records of the meeting. The Inspector of Elections has examined the proxies received and reports their holders of the majority of the shares of each Class A common stock and Class B common stock outstanding as of the record date are present in person or represented by proxy. Therefore, I declare a quorum present at the meeting.
On behalf of our Board of Directors, I'd like to express my appreciation to all stockholders who returned their proxies. It is now 6 minutes past 10, on June 11, 2013, and the polls are now open for voting. Those stockholders voting in person should mark their ballots and a company representative will be available to collect them for tabulation. Those of you who were present with a ballot, so that you can vote in person, were provided with a ballot when you entered the meeting. Ballots are also available in the room where registration took place. However, we urge stockholders to allow their proxies to stand. You will have an opportunity to ask questions after all matters being submitted to stockholders to vote are presented. Please hold your questions until that time.
The first matter to be acted upon by the stockholders is Proposal 1, approval on an amendment to the company's restated certificate of incorporation to clarify our ability to structure separation transactions, including the contemplated separation of our media and entertainment businesses and our publishing businesses as described in our Special Meeting Proxy Statement. Such that we can make distributions to our stockholders in separate classes of stock of our subsidiaries comparable to the classes of stock currently held by them.
Proposal 2 is an approval on an amendment of the company's restated certificate of incorporation to allow us to make certain noncash distributions on shares of our stock held by our wholly-owned subsidiaries in separation transactions and to create additional subsidiary-owned shares with similar rights to distributions, each to enable us to consummate the separation in the manner contemplated.
Proposal 3 is for approval on an amendment of the company's restated certificate of incorporation, which will change the company's name to Twenty-First Century Fox, Inc. on or about the date for the consummation of the separation.
I will now present a summary of the Inspector of Elections' preliminary report based on the proxies we have received. The Inspector of Elections' final report will be filed with our corporate secretary following the meeting.
An overwhelming majority of the outstanding shares of Class A common stock and Class B common stock, each voting as a separate class, had been voted for Proposals 1 and 2. I'm also happy to report that an overwhelming majority of the outstanding shares of Class B common stock had been voted for Proposal 3. Thank you for your support. We will report the final results of the meeting in an SEC filing, which we'll make following the end of this meeting.
If you are a stockholder and have a question regarding to any of the proposals, you may step up to the microphones and present the pink or yellow admission ticket that you received upon registering to the company representative. Before asking your question, please state your name and affiliation. As noted in the rules of the meeting they were provided to you when you registered today, each person is limited to 2 questions, which should be no longer than 1 minute in length.
As also noted in the rules of the meeting, we require that you restrict your remarks to the proposals that are being considered at this meeting and the proposed separation of the company. We ask you that you comply with the rules of the meeting, so that we can conduct an orderly meeting and those who would like to speak have an opportunity to do so.
So now we're open for questions and answers. And I'll sit with my colleagues.
Question-and-Answer Session
Laura Campos
Good morning. I'm Laura Campos, I'm with The Nathan Cummings Foundation. I have a question about Proposal 1. As I was reading through the proxy, I noticed there were several possible disadvantages associated with approval of Proposal 1, including the decoupling of voting and economic interest and the possibility that the company's significant voting shareholders can pursue their interest to the detriment of other shareholders. I've also noted that numerous studies have found that companies with dual-class capital structure typically invest less, grow more slowly and have lower valuation. Last year, non-Murdoch Class B shareholders overwhelmingly indicated a clear preference for elimination of the company's dual-class capital structure. Could you please tell me if you chose to consider this preference when you recommended for Proposal 1? And if you didn't consider it, can you just talk about why you chose to ignore it?
Keith Rupert Murdoch
So the Proposal 1 was necessary to effect the separation through dividend. There's a -- article of incorporation that essentially provided that everyone who would receive the same consideration on distributions and because A shareholders would receive A and B are going to receive B, we thought it necessary to amend the articles to allow us to go forward and then contemplate. So it's essentially necessary to treat people and give them back an interest that they had before, but in both companies. With respect to the dual class, this is an issue that's come up before. It's not, I think, related to Proposal 1 but as you know people of the company, this company has invested more and returned more and done better. So whatever the markers that you associate with dual-class structures, it's worked very well here. So it's a matter that the company will examine and consider going forward but the track record to date here has been enormously high.
Julie Tanner
Good morning. Julie Tanner with Christian Brothers Investment Services. We have 515,000 shares of Class A and 500 shares of Class B. And my question's related to the settlement with the Department of Justice, if the board could comment on that? And if so, how much is that? And also, question related to the split, is it intended to create the media equivalent of a bad bank with a legal bill for the Foreign Corrupt Practices Act breaches tied to the publishing business?
Keith Rupert Murdoch
So let me start with your first question. Nice to see you again. I suspect your question is triggered by an article that was published in the Guardian, which is testimony to the fact, the old adage, that those who are talking don't know, and those who know aren't talking. The reality is that there is no settlement that's been arranged with the Department of Justice. There have been no discussions of amounts. There have been no discussions of fines, period. We have an ongoing cooperative relations with the Department of Justice. That is where things stand. So your second question was about whether the separation was designed to create a bad bank.
Julie Tanner
And really about that legal bill, the Foreign Corrupt Practices Act to the publishers.
Keith Rupert Murdoch
Right. So obviously, the separation wasn't designed to create a bad bank, it was designed to unlock shareholder value, which is already done in considerable part. As far as locating the liability, in fact, an indemnity was established to make clear that any liability that Twenty-First Century Fox could possibly run, we don't think there should be one, but anything that would arise out of the FCPA investigation would be located with FOX, not with the publishing company. Any liability in the U.K., any criminal liability, we don't think there should be any, but again, if there is any, would be borne by the publishing entity. So it's not correct that a bad bank approach was followed. It is the case that anything arising out of the operations of what was once this joint entity will be shared in the manner described.
Laura Campos
With The Nathan Cummings Foundation, I'm Laura Campos, again. I'm just wondering if there are any independent members of the board who are here that can share what their deliberations were in respect to the separation and also the decision to replicate the dual-class capital structure?
Keith Rupert Murdoch
There are no independent directors here, but I can assure you that the decision was unanimous.
Laura Campos
Well we think that shareholders deserve an opportunity at least on a semi-yearly basis to see their directors, so I think it will be important to have independent directors at the Special Meeting.
Keith Rupert Murdoch
You will see the -- as you know the notice made it clear to all the shareholders that the focus is going to be on 3 questions. It would not be fair or appropriate to turn this into a general meeting. You do see the directors at the general meeting of shareholders. They're all present. They're available to answer questions about the dual-class structure, which as you know doesn't really relate to the 3 proposals of the meeting.
Laura Campos
Well I think it actually does, because very specifically in the proxy statement, when you were talking about Proposal 1, you cited possible disadvantages with that and it was very clearly talking about dual-class capital structure and the replication of that structure at the new company as well. So I think it absolutely does relate to this.
Keith Rupert Murdoch
So we've answered your question on it.
Julie Tanner
Just one final question, somewhat related to this because I do have concerns about voting for the split and that's related to another aspect about just a question again and there's no independent board members here, unfortunately. But possibly, you could comment on how independent shareholder views were factored into the creation of the structure of the new entities, given that 2/3 of non-Murdoch shares called for an independent chair. I think that's also significantly related question to the dual class.
Keith Rupert Murdoch
Okay. So the independent share issue is a perennial issue. It gets raised by yourself and other shareholders from time to time, gets considered by the company. The current thinking is, at least for News, that you have a experienced CEO who has best -- a wide range of accomplishments in publishing. He's dedicated to that business and we have as an executive chair -- as opposed to an independent chair, we have an executive chair, someone who built this business over 50 or 60 years. So it seemed like a good choice to lend strategic direction on a going forward basis. There's not any compelling empiric evidence that we've seen that generally, the independent chairs return more shareholder value and in the case of the company that we're talking about, that teaming of Robert Thompson and Rupert Murdoch seems to the board to be a compelling one. That said, the proposals are taken into account, the structure is considered -- it was considered when the separation was planned. And it seems they have met with extraordinarily wide shareholder approval because the voting numbers are over the top. So it -- the voting numbers when they are ultimately published will make clear with you that it was just the B-Class shareholders who supported this in overwhelming numbers, it was everyone.
Julie Tanner
You're talking about the split, not the independent chair.
Unknown Executive
The split, which is what we're talking about.
Julie Tanner
Right. Well, just because it was a significant vote when you have 2/3 of shareholders are calling for an independent chair, so the stand -- the responses you were giving were in general the rationale for an independent chair in general but just curious what type of deliberation and any changes that might have been made to accommodate that strong vote.
Unknown Executive
I think I've answered you what the thinking of the board and the Corporate Governance Committee was on the issue of independent chair versus executive chair. And obviously, to the extent it relates to the vote and it relates to the 3 proposals, the fact that we were going to have an executive chair, coupled with Robert Thompson who's disclosing all the materials and shareholders overwhelmingly supported it. So I think I've answered your question.
Julie Tanner
So the publishing business.
Keith Rupert Murdoch
I thank you very much for your attendance, we need to -- yes, go ahead.
Unknown Shareholder
Philip Berman [ph], portfolio manager and shareholder. Just some brief comments. The split up into 2 separate companies at this point in time will now give both individual companies the opportunity to make intensely-focused acquisitions and concentrate on their respective businesses and streamline anything that may develop in the future, emphasizing the global digital content strategies with less debt than before. It is highly noteworthy today that companies that have split their various divisions have attained higher individual stock prices when separated than they would have as a single entity. With respect to the newly minted Twenty-First Century Fox Corp., each individual theatrical film that reaches blockbuster status will now have a more pronounced effect on the stock price than before. Let us all remember that Rupert Murdoch pushed the envelope when he built News Corp. and he went above and beyond the envelope. Now we have an opportunity to repeat that outstanding performance in short order. In summary, as I said before, nobody does it better than Rupert Murdoch and we now look forward to the launching of the newly minted companies.
Keith Rupert Murdoch
Thank you very much, Mr. Berman. I should just add that the polls -- oh, it's now 10:22 on June 11, and the polls are now closed. And this calls to submit the collection of ballots, if necessary. Anybody want their ballots picked up? There's a couple there.
I think that concludes the business described in the notes of the Special Meeting. So the meeting is adjourned. Thank you very much for your attendance. Any stockholder wishing to inspect the minutes should contact our Corporate Secretary. Thank you very much.
