News Corp.’s BSkyB Bid in Peril?

Murdoch's company has pledged to forge ahead

It was less than two weeks ago that the British government gave Rupert Murdoch’s News Corp. the green light to move forward with the acquisition of British Sky Broadcasting. But that, of course, was before the newest reports of phone hacking at the News Corp.-owned News of the World came to light, leading to arrests, a public inquiry into the affair, and a significant drop in BSkyB share prices. News Corp. finally made the decision to shutter the tabloid in an attempt to salvage the BSkyB bid, but it may be too late.

U.K. culture secretary Jeremy Hunt agreed in March that News Corp. could "spin off" Sky News into a separate company with a separate board to ease antitrust worries. But he is now reconsidering his stance on the takeover. He told the BBC that in a letter he wrote to the U.K. Office of Communication and the Office of Fair Trading, he asked whether any of the new facts that emerged in the past week would cause them to reconsider their previous advice to let the deal move forward.

When asked if Hunt was having doubts as to whether News Corp. was still “fit and proper” to take control of BSkyB, Hunt replied, “You wouldn’t be human if you weren’t totally appalled by some of the revelations that have come to light… The question is whether there are things there that are relevant to the decision that I have to make, which is a merger decision.” If Ofcom does rule that the bid would lead to excessive concentration of media ownership in the U.K., the takeover could be effectively killed.

But in a confusing, jargon-filled statement released today, News Corp. has pledged to forge ahead with the deal. The company has withdrawn its pledge to spin off Sky News, a move that will send the deal to the Competition Commission—the British version of the Federal Trade Commission—for review. Murdoch's company said in the release, "News Corporation continues to believe that, taking into account the only relevant legal test, its proposed acquisition will not lead to there being insufficient plurality in news provision in the UK." 

Still, the opposition Labour Party has said that it would oppose a takeover vote in the House of Commons. Labour leader Ed Miliband said on a BBC Sunday talk show that he intends to force a Commons vote, saying that he regretted having to take the step but believed that Prime Minister David Cameron had left no other option to opponents of the bid with his refusal to take steps to halt the takeover. Blocking the vote could be a risky move for the Conservatives, who don’t want to be seen supporting Murdoch in light of the recent scandal.

Milliband told the BBC that Cameron “has got to understand that when the public have seen the disgusting revelations that we have seen this week, the idea that this organization, which has engaged in these terrible practices, should be allowed to take over BSkyB, to get that 100 percent stake, without the criminal investigation having being completed and on the basis of assurances from that self-same organization — frankly, that just won’t wash with the public.”