LONDON — News Corp.’s proposed £8 billion ($13 billion) purchase of the 61% of BSkyB it does not own already has been greenlit by the U.K. government on condition that Sky News is spun off into a new listed company.
The complex deal, certain to attract widespread criticism from rivals and commentators worried about the concentration of so much media power in the grip of one company, involves the setting up of a new firm, NewsCo.
News Corp. is to license the loss-making Sky News brand to the new operation for seven years and funding will be guaranteed for a decade.
The Murdoch-owned conglom will have a 39.1% stake in NewsCo — equivalent to its current holding in BSkyB — with the other stockholders comprised of existing investors in the paybox.
NewsCo is to be run by an independent board and chairman, a stipulation designed to ensure that no member of the Murdoch family chairs the new entity.
James Murdoch, who heads News Corp.’s activities in Europe and Asia, presently chairs both BSkyB and Sky News.
Hunt said: “Informed by advice from the regulators, I believe that these will address concerns about media plurality should the proposed News Corp./BSkyB merger go ahead.
“The undertakings offered would ensure that shareholdings in Sky News would remain unchanged, and indeed offer it more independence from News Corp. than it currently has.”
News Corp. now has to agree a price with BSkyB’s directors, but despite the fact that the value of the paybox’s stock has risen significantly since the takeover was announced last June, Murdoch knows that having full control of BSkyB represents a huge financial win for the conglom.
“Rupert Murdoch would have sold his granny to get the rest of BSkyB,” former Sunday Times editor and former Sky topper Andrew Neil told the BBC.
“It is worth billions to his balance sheet.”
Neil suggested the guarantees Murdoch has given the British government were unlikely to stand the test of time.
He said: “It is not clear that this is forever. Sky News could easily come back to the News Corp. fold.
“This gets Rupert through a difficult period. It is not the end of his connection to Sky News.
“With Rupert the real negotiations begin once you’ve done the deal.”
However, U.K. media commentator Steve Hewlett disagreed with Neil and said it was an “elegant” arrangement that would be legal binding.
“It is a proper structural remedy,” he said.
There will now be a 15-day consultation period on the agreement.
Owning BSkyB outright will overnight turn News Corp. into a media giant of unprecedented size in the U.K. market dwarfing all rivals in terms of revenue.
In a statement, News Corp. said that while it “continues to believe that the proposed acquisition of the shares in BSkyB that it does not already own will not result in insufficient plurality for any audience in the U.K., it has submitted this comprehensive proposal in order to avoid a lengthy and costly review by the Competition Commission.”