June 23 (Bloomberg) -- Rupert Murdoch’s News Corp. moved closer toward U.K. government approval of its 7.8 billion-pound ($12.5 billion) bid for British Sky Broadcasting Group Plc after regulator Ofcom submitted its recommendation on the offer.
The review of proposed undertakings was handed over yesterday, according to a spokesman for the U.K. regulator. A spokesman for the Department of Culture, Media and Sports confirmed it received the report. Full government approval would clear the way for price negotiations.
News Corp. faces opposition from rivals who say full ownership of the U.K.’s biggest pay-TV operator would give Murdoch too much power. News Corp has offered to spin off BSkyB’s Sky News, a 24-hour news channel, into a public limited company. Culture Secretary Jeremy Hunt may start an additional weeklong industry consultation as News Corp.’s undertakings have changed, said a person familiar with the matter who declined to be identified because the deliberations are confidential.
“It moves the process forward, the focus is the construction of this independently monitored Sky News entity,” Mike Jeremy, an analyst at Daniel Stewart Securities, said in a telephone interview. “Once that’s out the way I think the government will have done its job. It can’t go on ad infinitum.”
News Corp., which owns four of the U.K.’s largest newspapers, has up to two months after winning regulatory clearances to negotiate an agreed offer for 61 percent of the pay-TV operator it doesn’t already own. A News Corp. spokeswoman declined to comment.
Hunt, who has said he’s minded to approve the deal, is set to return from a visit to Brazil today, according to his department.
Murdoch may have to raise its 700 pence-a-share bid, which was rejected last June by independent directors as too low, to win over shareholders, investors including Odey Asset Management and Westchester Capital Management Inc. have said.
BSkyB shares rose as much as 11 pence, or 1.3 percent, to 841.5 pence and traded at 839 pence as of 8:22 a.m. in London. Before today, the stock has gained 45 percent since Murdoch made its initial offer in June last year. New Corp. gained 0.4 percent to $16.72 in New York yesterday.
News Corp. may be willing to pay 900 pence to 1,000 pence per share, Citigroup Inc. analysts including Thomas Singlehurst said in March. BSkyB’s independent directors in June last year said they may accept an offer of at least 800 pence.
BSkyb, based in Isleworth, England, has about 16,500 employees and 10 million U.K. customers for services that include sports, on-demand TV and high-end international content from networks such as Time Warner Inc.’s HBO.
News Corp.’s brands include the Fox TV networks and film studios, the Wall Street Journal newspaper and book publisher HarperCollins. In addition to BSkyB, News Corp. has invested in pay-TV broadcasters in Italy, Germany, and Asia.
BSkyB may help Murdoch make News Corp.’s newspaper business more profitable by allowing him to bundle newspaper and pay-TV subscriptions and spread content over different media platforms. Murdoch is already leading the effort to get readers to pay for online content amid losses at the U.K. newspapers.
The Sun, a News Corp.-owned newspaper, backed the Conservatives in the U.K.’s general election in May after previously supporting the opposition Labour Party.
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