BSkyB faces defeat on buyback plan

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The Independent Online

BSkyB's Planned share buy-back faces possible defeat at the satellite broadcaster's forthcoming annual meeting, according to a number of its leading independent shareholders.

BSkyB's Planned share buy-back faces possible defeat at the satellite broadcaster's forthcoming annual meeting, according to a number of its leading independent shareholders.

There is widespread opposition to the plan, which would raise the shareholding of News Corporation, chaired by Rupert Murdoch, from 35 per cent to 37 per cent.

News Corp has made it clear that it does not want to participate in the buy-back, stirring accusations of a "creeping takeover" of the company by its biggest shareholder.

One shareholder, Isis, said the buy-back move was undoing the "very impressive work" that Sky had undertaken in other areas to improve its corporate governance. Richard Singleton, the director of corporate governance at Isis, said: "The way they're doing this has set alarm bells ringing. It seems to be a case of using BSkyB money to increase News Corp's shareholding."

As well as proposing a resolution to authorise the buy-back at the AGM next month, Sky will also put a "whitewash resolution" to the vote that would exempt News Corp from participating in the buy-back. As it benefits from this second highly controversial proposal, News Corp cannot vote its 35 per cent holding on the issue, which requires a simple majority to go through.

Mr Singleton said: "There is certainly the risk of defeat on this, or, failing that, the probability of severe embarrassment."

Sentiment among investors was not helped by comments made this week by Mr Murdoch, who publicly stated that a bid by News Corp for Sky would be "tempting" were it not for the current weakness of the dollar. Sky shares plunged in August after the company admitted that subscriber growth had stalled and the stock was yet to recover.

William Claxton-Smith, the director of UK equities at Insight Asset Management, another leading shareholder, said the surplus cash that Sky sought to return to shareholders must be returned via a special dividend or by News Corp participating, pro-rata, in any buy-back. "It's that simple," he said. "You've got to ask why News Corp are not sellers of the shares."

He added that the reassurance on the "creeping takeover" point was one of the concessions that News Corp had been forced to grant its own shareholders in order to get them onside for its proposed move of domicile from Australia to the US.

Sky has not yet sent to shareholders the details of the resolutions to be put to the AGM. However, it has canvassed opinion among investors. Despite the negative reaction in many quarters, Sky sources insisted the company would press ahead with asking for the exemption for News Corp.

The dispensation is needed because ordinarily any increase, in the stake of an investor holding 30 per cent or more of a company, would trigger an automatic bid for that company, under rule 9 of the Takeover Code.

While a number of shareholders, who did not wish to be named, said they would oppose the whitewash resolution or were seriously considering voting against it, some said they were willing to allow it as a one-off event. One investor said: "We have flagged this up to Sky as a issue of sensitivity. If this would have taken them over 40 per cent, the shutters would come down and we would say no. We will probably let it go this time."

Separately, it is understood that Sky is rethinking its proposed new remuneration package for directors after negative reaction to the proposed incentive plan in consultations with shareholders.

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