Bloomberg News

News Corp.’s BSkyB Bid May Become Pricier as Review Drags on

June 30, 2011

June 30 (Bloomberg) -- Rupert Murdoch’s News Corp. faces a further review for its planned takeover of British Sky Broadcasting Group Plc as the stock today reached its highest since the initial June 2010 bid, potentially making the deal more expensive.

The U.K. government today asked rivals for the second time since March to respond to News Corp.’s proposed undertakings. The additional delay may force Murdoch to raise his 7.8 billion- pound ($12.5 billion) bid for the U.K.’ biggest pay-TV broadcaster as the benchmark index has risen 15 percent since the offer last June, said Credit Suisse AG analyst Simon Baker.

“The starting point for Sky’s independent directors should be the pre-bid stock indexed up by the 15 percent rise in the value of the FTSE 100,” Baker said. BSkyB should open talks at about 920 pence and may settle for 870 pence, he said.

News Corp., based in New York, today moved closer toward price negotiations for the 61 percent of the pay-TV operator it doesn’t already own after the government accepted plans to carve out the Sky News channel as a separate company. U.K. Culture Secretary Jeremy Hunt today imposed new conditions and said the new consultation will run until July 8.

News Corp.’s bid has also become about $1 billion more expensive since the initial offer because of the pound’s gain against the U.S. dollar. The bid was worth $11.5 billion when it was first announced.

BSkyB shares rose as much as 0.3 percent to 850.5 pence in London today, the highest intraday level since December 2001, and stood at 849 pence at 11:34 a.m., giving the company a market value of 14.9 billion pounds. The shares have gained 15 percent so far this year. News Corp. added 1.3 percent yesterday to $17.39 in New York.

New Conditions

News Corp. will nominate a monitoring trustee to oversee the spin off process, and the Sky News board meetings must include an independent director with senior editorial or journalistic experience for decisions on editorial issues, Hunt said.

“I could have decided to accept the original undertakings but a number of suggestions were made in response to the consultation which could further strengthen the undertakings,” Hunt said in a statement, as the government published the results of a consultation on earlier pledges.

News Corp., which owns four of the U.K.’s largest newspapers, has up to two months after winning regulatory clearances to negotiate the agreed offer.

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. The government said today it received more than 40,000 responses to its initial consultation.

40,000 Responses

“I don’t think anyone anticipated that there’d be 40,000 responses to the first one and it would take as long to get through them as they did,” said Paul Richards, an analyst at Numis Securities in London. “If there are a similar number of replies again then it could take really some time.”

Enders Analysis said in a research note this week said it expected regulatory barriers to be cleared in July, with a purchase concluded by the middle of October if News Corp. and BSkyB can agree on a price.

Avaaz, an advocacy group that organizes campaigns for citizens, said in a statement today that it may seek permission for a judicial review of the government decision.

Sky must continue to cross-promote Sky News as a public limited company on its channels, Hunt said today. News Corp. said it would continue to cooperate with the regulatory process.

“We will continue to engage constructively with the regulatory process,” News Corp. said in a statement today.

--Editors: Simon Thiel, Kenneth Wong.

To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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