News Corp shareholders may sue over Doulton

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The Independent Online
DISGRUNTLED News Corporation preference shareholders are considering suing the Australian company in a dispute over the ownership of shares in Royal Doulton, the fine china maker.

The row, brewing since the end of January, relates to shares in the newly demerged company issued by Pearson, in which News Corp has a 4.9 per cent stake.

In 1989, News Corp raised about pounds 250m through preference shares issued by its Cayman Islands subsidiaries, News Cayman and News Cayman Investment.

News Corp then owned 20 per cent of Pearson, and, unusually, shareholders were given the right to swap their News Corp preference shares for Pearson shares.

When Pearson decided to demerge Royal Doulton last December, giving each shareholder one share in Royal Doulton for every 10 existing shares, News Corp's preference shareholders assumed that instead of receiving Pearson shares when they exercised their exchange rights, they would receive both Royal Doulton and Pearson shares.

In this they were taking the same line as News Corp itself took in a statement published on 13 December in the Financial Times.

However, a subsequent notice published by the company on 31 January said that the company was taking legal advice on the entitlement to the shares. Yesterday, News Corp said its lawyers had advised that preference shareholders had no rights to the Royal Doulton shares and 'apologised for the error which the notices contained and regret any inconvenience'.

A number of shareholders have indicated they are outraged by this view, and intend to take legal advice. The Stock Exchange, where News Corp has a secondary listing - its main listing is in Australia - said it had 'noted' the statement.

News Corp maintains the Royal Doulton shares are the equivalent of a dividend payment by Pearson, rather than a distribution of capital. News Corp, rather than the preference shareholders, has the right to Pearson dividends.