View from City Road: Trying to figure out Murdoch's move

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The Independent Online
Every so often a window opens into Rupert Murdoch's News Corporation, and the scene is rarely a pretty one. Hard on the heels of Mr Murdoch's much-derided attempt to introduce a two- tier voting system comes its decision to deny holders of its arcane Pearson-backed preference stock related shares in the recently demerged Royal Doulton.

Everyone - including News Corp - initially took the view that since the preference shareholders had the right to swap their stakes for shares in Pearson, they would automatically have an equal right to swap their stakes for both bits of the company when it split.

That, however, was until News Corp's legion of lawyers was set to work on the problem. The split was unequal in size (one Royal Doulton share for every 10 Pearson shares). The legal beavers accordingly concluded that it was not a split at all, but in effect the payment of a dividend.

No one else, from Pearson to the Inland Revenue, viewed the Pearson demerger in this fashion, but that does not seem to have deterred News Corp. Nor did the fact that some preference shareholders had acted on its earlier verdict and sold Royal Doulton shares that it now turns out they did not own. Nor again did the fact that this led to an unseemly scramble for Royal Doulton shares as those shareholders sought to cover themselves.

Maybe News Corp was merely doing its duty, exercising a judgement of Solomon between its ordinary and its preference shareholders. But there is also a less charitable explanation.