News Corp. hopes for takeover fade
LONDON — Shares in BSkyB plunged Monday as the U.K. government sought to apply the brakes to News Corp.’s takeover of the pay TV company.BSkyB’s stock price dropped 7% in early trading Monday to £6.99 pence ($11.16). This follows a 12% fall last week, from £8.50 ($13.57) last Monday, when it was assumed the deal would be greenlit immediately. Investors are rapidly concluding that the move by News Corp. to buy the 61% of BSkyB stock it does not already own will not be allowed to proceed. The share slide follows U.K. Culture Secretary Jeremy Hunt’s decision on Monday to ask media regulator Ofcom and anti-trust org the Office for Fair Trading to look again at whether the deal should be allowed to go ahead. Hunt asked the orgs to advise him about how to proceed in the light of the latest revelations in the phone hacking scandal involving the News of the World newspaper, which was run by News Corp. subsid News Intl. until it was shuttered Sunday. The ruling Conservative-Liberal Democrat coalition government has grown increasingly nervous following a tumultuous week when further allegations of illegal activity by News of the World staff came to light. It also coincided with the arrest of several former News of the World employees, including Andy Coulson, the paper’s former editor who later became an aide to Prime Minister David Cameron. Ofcom has the power to remove News Corp.’s license to broadcast if it concludes that its execs and shareholders fail its “fit and proper person” test. Rupert Murdoch arrived in London on Sunday and appeared to suggest that it was business as usual as he met with senior News Corp. execs, including James Murdoch, deputy chief operating officer, and chairman of both BSkyB and News Intl., and Rebekah Brooks, News Intl.’s CEO. Although several leading politicians have said Brooks should go, Rupert Murdoch has made it clear that she still has his support. If any of the News Corp. execs were to be sacrificed, it is likely to be Les Hinton, CEO of Dow Jones and publisher of the Wall Street Journal, who was formerly exec chairman of News Intl. According to the BBC, a News Intl. internal document produced in 2007, when Hinton was in charge and Coulson was News of the World editor, had made it clear that phone hacking was far more widespread than Hinton had admitted to Parliament at the time, when he had said there was only one rogue reporter. However, Hinton may claim that he did not see that document. A further threat for the BSkyB deal comes from a motion that the opposition Labour Party, with the support of leading figures in the Liberal Democrats, is set to put before Parliament on Wednesday. This will seek to delay approval for the deal until all criminal investigations involving the News of the World are concluded, which could take several years.