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Murdoch Sued; Shareholders Accuse Him of ‘Paying for Nepotism’

News Corp. board accused of unfairly agreeing to acquisition of company run by his daughter Elisabeth

The board of Rupert Murdoch's News Corporation is being sued by a group of shareholders over its $675 million agreement to buy Shine Group, the television production company owned by Murdoch's daughter Elisabeth.

Also read: News Corp. to Acquire Liz Murdoch's Shine Group

The lawsuit, filed by the Amalgamated Bank of New York and the Central Laborers Pension Fund on Wednesday, accuses the News Corp. board of "paying for nepotism" and not questioning Rupert Murdoch, its chairman.

"In short, Murdoch is causing News Corp to pay $675 million for nepotism," the lawsuit claims. "In addition to larding the executive ranks of the company with his offspring, Murdoch constantly engages in transactions designed to benefit family members."

As part of the deal, which is expected to close this month, Elisabeth Murdoch will get a seat on the News Corp. board — which has led some to speculate that Elisabeth, 42, is being groomed to take over for Rupert when the elder Murdoch, 80, retires. James Murdoch, Rupert's 39-year-old son, was considered by many to be his heir apparent.

The suit adds: "Although the transaction makes little or no sense for News Corporation and is far above a price any independent, disinterested party would pay for Shine, it is unsurprising that the transaction was approved by News Corporation's board."

A spokesperson for News Corp. called the suit "meritless."

Founded in 2001 and based in London, Shine has grown from revenues of $38 million in 2006 to about $400 million in 2009, according to the company's website.

The company focuses on television production, both scripted and non-scripted. In 2008 it purchased Reveille, producer of the hits "Ugly Betty" and "The Tudors," for $125 million. This year Shine produced Paula Abdul's "Live to Dance."