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Murdoch's BSkyB Deal Chances Improve as Conservative Hunt Is Given Review
Rupert Murdoch’s News Corp.’s chance of winning regulatory approval to buy British Sky Broadcasting Group Plc got a boost after Conservative culture minister Jeremy Hunt was given responsibility for the review.
Business Secretary Vince Cable yesterday was stripped of the authority to decide whether the transaction gives News Corp. too much power after he was quoted as saying he had “declared war” on Murdoch. Prime Minister David Cameron transferred that responsibility to Hunt, who earlier this year said that the range of voices in the media won’t change following the deal.
News Corp., the owner of four of the largest U.K. newspapers, in June offered 7.8 billion pounds ($12.1 billion) for the remaining 61 percent stake in BSkyB, the U.K.’s biggest pay-TV company. Media regulator Ofcom will report to the culture minister by Dec. 31 on how the deal might affect British media and whether to refer the case to the Competition Commission.
“The odds of a referral have decreased significantly,” said Conor O’Shea, an analyst at Kepler Capital Markets in Paris. “There’s a major perceived change in the way that Jeremy Hunt views things as opposed to Vince Cable.”
BSkyB shares rose 2 percent to 743 pence in London trading, the steepest gain since the offer was announced in June. BSkyB rejected News Corp.’s initial 700 pence a share offer as too low. The companies are seeking regulatory approval before a new offer is made. News Corp. won European Union approval for the proposed purchase yesterday.
News Corp. canceled a proposed 2011 advertising campaign designed to win support for the takeover, former Sky TV chairman Andrew Neil said today on Sky News. A spokeswoman for News Corp. declined to comment.
The likelihood of a deal going through after Cable’s “disastrous and very public implosion” increased to 90 percent from 66 percent, Investec Securities analyst Steve Liechti said today. Investec raised the target price for BSkyB’s stock to 793 pence from 700 pence.
“It does seem to me that News Corp do control Sky already,” Hunt said in an interview with the Financial Times after the bid was announced in June. “So it isn’t clear to me that in terms of media plurality there is a substantive change, but I don’t want to second guess what regulators might decide.”
The U.K. government decision may create a dilemma for the coalition of Cameron, whose Conservative Party was backed by Murdoch’s newspaper the Sun in Britain’s May general election. Cable, 67, is the No. 2 Liberal Democrat in Cameron’s Conservative-led coalition.
Ed Miliband, leader of the U.K.’s opposition Labour Party, said today he will write to Cabinet Secretary Gus O’Donnell to ask whether Hunt “is a fit and proper person to be making the decision” given his past comments about the BSkyB bid.
Murdoch “is trying to take over BSkyB, you probably know that,” Cable told Daily Telegraph reporters who posed as constituents without identifying themselves as journalists. “For the people who know what is happening, this is a big thing. His whole empire is now under attack.”
New York-based News Corp. said yesterday it was “shocked and dismayed” by the comments. Cable’s remarks “raise serious questions about fairness and due process,” company spokeswoman Miranda Higham said in a telephone interview.
The proposed deal prompted a letter signed by the owners of newspapers including the Daily Telegraph and the Guardian calling for the bid to be challenged by the U.K. government. The Church of England also opposed the bid.
Hunt, 44, is more in favor of business in the media and broadcasting market, Kepler’s O’Shea said. The culture minister, who has a degree in politics, philosophy and economics from Oxford University, also set up his own educational company that publishes guides and websites to find the right course or college.
In 2008, Hunt said in an interview with Broadcast magazine, published on his website, that “rather than worry about Rupert Murdoch owning another TV channel, what we should recognize is that he has probably done more to create variety and choice in British TV than any other single person because of his huge investment in setting up Sky TV.”
The culture and media department will follow Cable’s proposed timeline when deciding whether to refer the deal, according to a spokeswoman, who declined to be identified. Cable had said he will review Ofcom’s findings after lawmakers return to parliament on Jan. 10.
The uproar over Cable’s comments have bolstered News Corp.’s position, setting the stage for Murdoch’s company to claim that the Ofcom review was “tainted from the start,” said Frances Murphy, a lawyer who leads the antitrust group at Jones Day LLP in London.
“The U.K. government is now in an impossibly difficult position -- any block will look politically motivated and will be open to challenge,” Murphy said.
“The process has returned to its proper place,” Jeremy said. Cable’s comments made it more likely that Hunt’s actions will be “scrutinized for behavior which is shown to be unbiased.”
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