UPDATE 1-Shareholders sue Murdoch for buying daughter's firm

Wed Mar 16, 2011 5:53pm EDT

* Lawsuit says board did not question Shine Group deal

* Shareholders say News Corp "paying for nepotism" (Adds News Corp declining to comment in the third paragraph)

WILMINGTON, Del., March 16 (Reuters) - The board of News Corp (NWSA.O) has been sued by shareholders for agreeing to buy a business owned by Chairman Rupert Murdoch's daughter for about $675 million, according to a lawsuit filed on Wednesday.

A trustee for several retirement funds said the board of News Corp approved the "unfairly" priced deal without questioning or challenging the elder Murdoch, who founded the company and is also chief executive.

News Corp declined to comment.

The chairman of News Corp said he expected his daughter Elisabeth to join his company's board after buying her Shine Group television production business.

The deal raised new questions about succession at News Corp, which owns the broadcaster Fox and publishes the Wall Street Journal. For details, see [ID:nL3E7DL0WW]

"In short, Murdoch is causing News Corp to pay $675 million for nepotism," said the lawsuit, which was filed in Delaware's Chancery Court.

"In addition to larding the executive ranks of the company with his offspring, Murdoch constantly engages in transactions designed to benefit family members," said the lawsuit by Amalgamated Bank, a trustee for several investment funds holding more than 1 million News Corp shares.

The lawsuit was also joined by the Central Laborers Pension Fund.

The lawsuit seeks damages and a declaration the board breached their fiduciary duty to shareholders.

The case is Amalagamated Bank et al v K. Rupert Murdoch et al, Delaware Chancery Court, No. 6285. (Reporting by Tom Hals; Editing by Bernard Orr)

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