LONDON (AP) ? News Corp. has withdrawn a promise to spin off Sky News as a condition of its takeover of satellite network British Sky Broadcasting PLC.
The company’s move on Monday means the government is almost certain to refer the bid to Britain’s Competition Commission for a full-scale inquiry into whether the takeover would break anti-monopoly laws. If it does, the bid would likely be on hold for several months.
The government is under intense pressure to block the bid following revelations of phone hacking at the Sunday tabloid News of the World.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
LONDON (AP) ? Growing doubts over News Corp.’s ability to take full control of lucrative satellite broadcaster British Sky Broadcasting PLC sent both companies’ share prices skidding Monday.
Amid signs the British government is looking at ways to block the deal following a phone hacking scandal that has already killed off the News of the World newspaper, investors think that Rupert Murdoch’s News Corp. will have to scrap its bid to buy the 61 percent of BSkyB it doesn’t already hold.
By early afternoon, BSkyB shares were down 6.4 percent at 702 pence ($11.15) on the London Stock Exchange. Just a week ago, BSkyB’s shares were trading as high as 850 pence, meaning the company has shed a little over 17 percent of its value, or nearly 2.7 billion pounds ($4.3 billion).
In New York, News Corp. shares were down 6.5 percent at $16.2o soon after the open.
“It is unlikely that approval could be granted until the criminal investigation into phone-hacking and subsequent related public enquiries have been completed, which could take years,” said Sam Hart, an analyst at Charles Stanley.
A failure to clinch the 7.5 billion pound ($11.9 billion) takeover would represent a huge setback for Murdoch’s ambitions, who over the past four decades has built up his empire. As well as owning Fox News and the 20th Century Fox film studio, News Corp. owns a raft of newspapers and media outlets all round the world.
As well as being News Corp.’s biggest ever acquisition, full control of BSkyB would have given News Corp. 100 percent of what has become an increasingly profitable enterprise. In the last financial year, BSkyB made a pretax profit of a little under 900 million pounds ($1.43 billion) through a combination of exclusive sports rights and blockbuster movies.
Just a week ago, it looked like the British government was going to wave the deal through, subject to some minor conditions, including spinning off the Sky News network. One of the major worries among Murdoch critics was that his stable of news outlets would have too much power over the British media.
However, the noises coming out of government have certainly changed over the past few days.
On Monday, deputy Prime Minister Nick Clegg urged Murdoch to “do the decent and sensible thing” and reconsider the bid for BSkyB. “I would simply say to him, look how people feel about this,” Clegg said.
Doubts over the future of the deal were further reinforced by the news that the government minister dealing with the bid, Culture Secretary Jeremy Hunt, has sought fresh advice on the fitness of News Corp. to hold a broadcasting license.
Hunt said he is also seeking fresh advice from the competition regulator, the Office of Fair Trading, whether it stands by earlier advice that the takeover was acceptable in light of last week’s decision to close the News of the World.
Further pressure is coming from the opposition Labour Party, which is working to force a vote in the House of Commons on a motion asking the government to delay a decision on BSkyB. Liberal Democrats, the junior partner in Prime Minister David Cameron’s government, have signaled that they are ready to support that motion.
Alex DeGroote, analyst at Panmure Gordon, even raised the possibility that News Corp. may even have to sell the 39 percent in BSkyB it already holds following the news that Hunt is asking the communications regulator, Ofcom, whether News Corp. is “fit and proper” to hold a broadcasting license. If Ofcom decides it isn’t, a license would be denied.
Murdoch has arrived in London to lead his company’s response to the scandal that has engulfed his organization over the past week since damaging revelations over the scale of phone hacking at the News of the World, which closed Sunday after 168 years. He met on Sunday with Rebekah Brooks, chief executive of News Corp.’s British unit, News International.
Brooks and several executives have offered to be interviewed by police as witnesses, a source at News International confirmed, speaking on condition of anonymity.