Murdoch's BSkyB takeover boosted by Hunt approval for Sky News plans

Published on Thursday 3 March 2011 13:26

THE controversial takeover of BSkyB by Rupert Murdoch's News Corporation moved a step closer today after the Government backed proposals from the media giant to spin off Sky News as a condition of any deal.

Culture Secretary Jeremy Hunt said he was minded to wave through the proposed takeover after News Corp revealed its intention to hive off the news channel into a new independent company in which it would retain a 39% stake. It has also pledged to fund the channel for 10 years.

The move comes as News Corp seeks to avoid a full-blown inquiry into its plans to buy the 61% of BSkyB it does not already own after Mr Hunt said last month he planned to refer the deal to the Competition Commission.

The undertakings are subject to a 15-day consultation period but an alliance of media groups attacked the proposal as "pure window-dressing" and said it would examine all legal options in relation to the plan.

News Corp has yet to agree a takeover price with BSkyB after its initial 700p-a-share bid, which valued the business at 12.3 billion, was rejected for being too low.

The two sides agreed to postpone setting a price until the regulatory hurdles have been overcome, but today's Financial Times said the price that News Corp is willing to pay is likely to be much lower than the 900p a share that many BSkyB investors are said to be expecting.

Mr Hunt, who took his decision following advice from regulators, said he was "very aware" of the controversy surrounding the deal but the remedies would address concerns about media plurality, should the takeover go ahead.

He said: "The undertakings offered would ensure that shareholdings in Sky News would remain unchanged, and indeed offer it more independence from News Corporation than it currently has.

"Nothing is more precious to me than the free and independent press for which this country is famous the world over."

Media watchdog Ofcom, which had submitted a critical report on News Corp's original takeover plans, said it supported the new proposals.

A spokesman said Ofcom was pleased News Corp had agreed to "place editorial independence and integrity at the heart" of the spun-off Sky News and "underpin this with arrangements that secure full independent governance".

News Corp, which also owns papers including The Sun and The Times, is offering to hive off Sky News into a company controlled by independent directors and with an independent editorial board.

It would fund the news channel for 10 years and agree a seven-year licensing agreement for it to use the Sky News name.

Existing BSkyB shareholders will be given an equivalent stake in the new company, but News Corp would not be allowed to increase its 39.1% shareholding for 10 years without permission from the Culture Secretary.

The announcement was slammed as a "whitewash" by an alliance of media groups, which includes BT, Guardian Media Group, Associated Newspapers, Trinity Mirror, Northcliffe Media and Telegraph Media Group.

A spokesman for the alliance said: "Smoke and mirrors will not protect media plurality in the UK from the overweening influence of News Corporation."