In a concession designed to secure regulatory approval to take control of British satcaster BSkyB, News Corp. has agreed to spin off its Sky News operation into a separate entity.
Deal, which could be announced by U.K. media minister Jeremy Hunt as early as today, is aimed at accelerating the British government’s approval of News Corp.’s $13.2 billion takeover of BSkyB and to assuage concerns that Rupurt Murdoch would have far too control over news in the U.K. News Corp. reps in the U.S. and U.K. declined to comment.
U.K. regulators have been pushing for the Sky News move since last late year. With the spinoff agreement apparently set, there’s speculation the greenlight for the BSkyB transaction will soon follow.
Deal, hammered out with U.K. regulators the Office of Fair Trading and Ofcom, and News Corp., involves the pay box retaining a 39.1% stake in Sky News that would be controlled by independent directors and an independent editorial board. Existing BSkyB stockholders would be given a stake in the divested Sky News.
News Corp. is also understood to have agreed to put up a lumpsum, plus a guarantee that it would fund Sky News for 10 years.
As part of the spinoff agreement, Sky News would continue to provide the BSkyB with 24-hour news.
News Corp. is looking to buy the 61% of BSkyB it does not own. An agreement with the Office of Fair Trading could be imminent. Other news outlets in the U.K. objected to the deal fearing that Murdoch would exert too much control over British media. He also owns the top selling tab the Sun, the Times, the Sunday Times and News of the World. News Corp. first made its bid for full contral of BSkyB in June.
Owning all of BSkyB would give Murdoch access to much more subscription revenue and decrease his dependency on the cyclical ad market in Britain’s highly competitive media market.
News Corp. may still be able to hold a 39% stake in the spun-off Sky News, to be controlled by an independent board, and has agreed to fund the operation for several years, according to reports from the BBC and the Financial Times.
Last year the European Union said there was no competition basis upon which to oppose the deal.