News Corp. gets crucial backing in takeover of British Sky Broadcasting
News Corp. has received the backing of a key British official, moving one step closer to taking control of British Sky Broadcasting.
Culture Secretary Jeremy Hunt said Thursday that he was inclined to accept News Corp.’s proposal to spin off Sky News into a separate company to address concerns about the editorial independence of the 24-hour news operation.
A final favorable decision, pending a 15-day public comment period, would avoid a lengthy and costly regulatory review by Britain’s Competition Commission, analysts said.
News Corp., which already owns 39% of BSkyB, announced its intention last summer to buy the remaining 61% stake in Britain’s largest pay-TV operator for $12.7 billion. Chief Operating Officer Chase Carey said at the time that the deal would help reduce the company’s reliance on cyclical ad revenue by increasing the amount of money it would receive from subscription fees.
The proposal has met with opposition from a group of media companies, including the owners of the Guardian, Daily Mail and Telegraph newspapers, which contended that it would have “serious and far-reaching consequences for the media,” because News Corp. already owns four of Britain’s largest newspapers.
Under News Corp.’s proposed remedy, Sky News would become an independent, publicly traded company, with shares distributed to existing BSkyB shareholders. News Corp. would retain a minority stake. Sky News would also receive a 10-year carriage agreement from BSkyB, assuring it a long-term revenue stream.
Michael Nathanson, a media analyst with Nomura Securities International Inc., predicted in a report that if the matter didn’t trigger a judicial review, BSkyB’s board would look to press News Corp. to sweeten the deal.
News Corp.’s initial offer in June had been rejected by Sky directors as too low.
