News Corp. drops BSkyB bid

Scandal forces Murdoch biz to scrap takeover plan

LONDON — In what is deemed a rare retreat for media maverick Rupert Murdoch, his media empire News Corp. announced on Wednesday that it was pulling its offer to take over full control of BSkyB, as political opposition in the U.K. escalated and continued advancements of News International’s phone-hacking scandal rippled across the worldwide media.

In an announcement, News Corp stated that it was withdrawing its bid to take over the 61% of BSkyB it did not already own, a deal which was near to close before revelations of the News International scandal were unveiled last week.

“We believed that the proposed acquisition of BSkyB by News Corporation would benefit both companies but it has become clear that it is too difficult to progress in this climate,” said News Corp.’s deputy chairman, prexy and COO Chase Carey. “News Corporation remains a committed long-term shareholder in BSkyB. We are proud of the success it has achieved and our contribution to it.”

After taking a beating since last week, News Corp. shares rebounded in trading on Wednesday to close up 58 cents, or 3.8%, to $15.93.

The announcement was welcomed amongst members of Blighty’s government as all three political parties had joined forces and were set to urge News Corp. to abandon the £8 billion ($12 billion) proposal in a non-binding House of Commons vote on Wednesday.

“The business should focus on clearing up the mess and getting its own house in order,” a spokesperson for Prime Minister David Cameron said while Deputy Prime Minister Nick Clegg said the withdrawal was the “decent and sensible” thing to do.

Labour party leader Ed Milliband said the decision was “a victory for people up and down this country who have been appalled by the revelations of the phone-hacking scandal and the failure of News International to take responsibility.”

BSkyB’s shares plummeted 3.6% immediately after the news to 669 pence ($10.73) per share, well below the 700 pence ($11.23) level when News Corp. originally bid for the broadcaster.

The defeat in the pursuit of BSkyB seems likely to spur News Corp.’s divestment of its UK newspaper assets. In a research note to investors issued Wednesday, Nomura Securities analysts Michael Nathanson noted that the scandal involving assets of lesser value to News Corp. overall have now prevented the company from obtaining full ownership of a more strategic asset, BSkyB.

“Perhaps this rebuke will force News Corp to reconsider its ownership of UK newspapers,” Nathanson wrote. “We hope this is a turning point for the company’s strategy and asset allocation as the ownership of highly inconsequential newspaper assets has forced the dropping of a strategically important asset.”

Abandoning the bid after continued political and public pressure is a rare move for Murdoch, whose News International, which houses U.K. papers The Sun, The Times, The Sunday Times, and the now-shuttered News of the World, is often credited for holding strong political sway in U.K. elections.

Criminal investigations into the alleged illegal activity of the News of the World, The Sun and The Sunday Times, are underway and could take years to conclude as proceedings are expected to look into the details of phone-hacking attempts to nearly 4,000 individuals.

According to Brit newspaper The Guardian, News Corp.’s decision to pull out of the bid was made early Wednesday before the Prime Minister’s questions, in which Cameron announced details of two individual inquiries into phone hacking and media standards.

Addressing cabinet ministers, Cameron said that “the people involved, whether they were directly responsible for the wrongdoing, sanctioned it, or covered it up, however high or low they go, must not only be brought to justice, they must also have no future role in the running of a media company in our country.”

New revelations of the scandals have mushroomed by the hour since the News of the World was shuttered on July 7.

On Wednesday, the paper’s legal manager Tom Crone was the latest in a raft of execs to ankle News International.

On the other side of the pond, U.S. senator Jay Rockefeller called for an investigation into News Corporation’s U.S. organizations to see whether any journalists working in for Murdoch’s companies had targeted U.S. citizens.

In Australia, where Murdoch was born and started his media empire, the mogul’s papers launched a full review of their books over the past three years to “confirm that payments to contributors and other third parties were for legitimate services.”

Sam Thielman contributed to this report.

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