Bloomberg News

BSkyB Plans $1.2 Billion Buyback After News Corp. Drops Bid

July 29, 2011

(Updates with CEO comment starting in fourth paragraph. For more coverage of News Corp., see EXT3 <GO>.)

July 29 (Bloomberg) -- British Sky Broadcasting Group Plc, will buy back 750 million pounds ($1.2 billion) in shares, two weeks after Rupert Murdoch’s News Corp. abandoned its bid for the rest of the pay-television broadcaster.

News Corp.’s 39 percent holding in BSkyB won’t increase after the stock repurchase, the Isleworth, England-based broadcaster said today. Full-year earnings before interest, taxes, depreciation and amortization were 1.41 billion pounds, exceeding the 1.39 billion-pound average estimate of 19 analysts compiled by Bloomberg.

News Corp. shelved its 7.8 billion-pound bid for the remaining shares on July 14 after allegations of phone hacking at its now-defunct News of the World tabloid engulfed the media company and prompted an unprecedented political backlash. James Murdoch, the 38-year-old son of Rupert Murdoch, will remain as BSkyB chairman. The 14-person board, which gave him unanimous support at a meeting yesterday, will continue to monitor events, Chief Executive Officer Jeremy Darroch said today.

“It was obviously a very full discussion,” Darroch said on a conference call. “At the end of that, the board was unanimous in its support for James to continue as chairman.”

Voting Rights

BSkyB’s had fallen 16 percent from this year’s high of 850 pence before the Guardian reported July 4 that News of the World employees intercepted murder victim Milly Dowler’s voice mails in 2002. The stock rose as much as 2.1 percent, and traded 0.6 percent higher at 720.5 pence as of 8:44 a.m. in London.

The broadcaster also increased its full-year dividend by 20 percent to 23.3 pence a share, totaling 253 million pounds. BSkyB’s free cash flow adjusted for some items jumped 51 percent to 869 million pounds.

News Corp. will maintain both its voting and economic interests, BSkyB said. “News Corp. on an ordinary basis would not want to sell shares in Sky,” Darroch said on. By tendering its own shares, News Corp. avoids “issues around creeping control.”

“Shareholders in the round are feeling bruised after the share price collapse over the last two to three weeks,” said Alex de Groote, an analyst at Panmure Gordon in London. “Realistically there’s not going to be a bid for Sky for the foreseeable future so they want to be compensated for that.”

Under Pressure

BSkyB’s board had come under pressure to review James Murdoch’s position as non-executive chairman, after his testimony to U.K. lawmakers on July 19 over the phone-hacking scandal was contradicted by two former employees. While the hacking incidents took place before he started overseeing News Corp.’s News International U.K. publishing unit, Murdoch authorized settlements to hacking victims that are now being questioned.

BSkyB said today independent directors Allan Leighton and David Evans will step down at the company’s annual meeting in the fall.

News Corp. is dealing with three probes by police and regulators into phone hacking at the News of the World. At least 10 people have been arrested, including former News International CEO Rebekah Brooks and ex-News of the World editor Andy Coulson, who was Prime Minister David Cameron’s press chief until January.

BSkyB also said today it acquired Formula 1 rights to show all races between 2012 and 2018 alongside the British Broadcasting Corp.

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.

--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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