News Corporation may pay �1.9bn more than original offer after delay brought about by eight-month inquiry
Rupert Murdoch is likely to end up having to pay nearly �2bn more to secure full control of BSkyB, after being forced to wait over a year for regulatory approval to buy the 61% of satellite broadcaster BSkyB his News Corporation does not already own.
The media mogul proposed a �7.4bn takeover offer in June last year priced at 700p per Sky share, but after objections from most of the rest of Fleet Street ? worried about the combination of the largest UK newspaper owner and the largest broadcaster ? the takeover bid was referred to the competition authorities by the business secretary, Vince Cable.
That triggered an eight-month inquiry ? which all but ended when the culture secretary, Jeremy Hunt, put the finishing touches to a series of undertakings aimed at safeguarding "media plurality". They would require the enlarged company to spin off Sky News for at least 10 years, capping News Corp's shareholding at its current 39.1%.
While the process dragged on Vince Cable was stripped of his power to take the decision after he was covertly recorded by Daily Telegraph journalists as saying he had "declared war on Murdoch" last December. Meanwhile Sky's share price continued to soar ? reaching 846.5p last night.
Rupert Murdoch's company insisted that it will not "overpay" to buy BSkyB. However, sources close to the Sky board indicated they believed that a deal would be done at the price of 875p, which would cost News Corporation �9.3bn ? some �1.9bn more than the media giant was originally prepared to offer.
Hunt said he was "aware of the huge interest" in the takeover, but thought that the undertakings to spin off Sky News were "still sufficient to ensure media plurality". He said he had made the undertakings "more robust", by ensuring for example that it was necessary to have an independent director with senior journalism expertise present at Sky News board meetings where decisions on editorial matters are taken.
Hunt was later forced to defend his decision in parliament, answering an urgent question from Tom Watson, MP. In a short, stormy debate, several Labour MPs tried to argue that the News Corp bid should not have been allowed to go through in the light of the News of the World phone hacking scandal, which has seen more than 30 high profile people bring civil actions against the publisher.
"This seedy bid would shame a banana republic," Watson said, while Labour frontbencher Ivan Lewis asked why Hunt had had "so little to say on the phone hacking scandal". However, aided by Speaker John Bercow, who ruled that questions on phone hacking were out of order in this context, Hunt was able to dodge the issue in the chamber.
Shortly afterwards, in the Lords, Lord Prescott went further, arguing that Murdoch "to my mind, is not a fit and proper person to be purchasing such an organisation".
Hunt's advisers reiterated that it was not possible for the culture secretary to take the phone hacking scandal into account, because the minister had been assessing whether the takeover could go through on the grounds of "media plurality" rather than on the basis of a "fit and proper person test" ? which would have brought the hacking issue into account. By keeping Sky News at arm's length from the Times, the Sun and News Corp's headquarters, the minister had in effect done his job.
Those opposing the deal, led by the unlikely alliance of owners of the Daily Telegraph, Daily Mirror, Daily Mail and the Guardian, said they were disappointed by the announcement, and indicated they would consider whether there was any possibility of mounting a judicial review.
However, the group of newspapers will only seek to challenge the ruling on plurality grounds, if they mount a challenge at all. Hunt's slow and measured consultation process was designed purely to avoid a judicial review. Hunt said interested parties had until midday on 8 July to give their opinion on the extra undertakings.
Meanwhile, online campaign group Avaaz, who gathered outside the Department of Culture with an "eight-foot tall stilt-walking Murdoch caricature ? controlling wooden Jeremy Hunt and David Cameron puppets on strings", set up an internet petition in the hope of deluging Hunt with paperwork that will further delay his final approval of the deal.
Roger Parry, a veteran media executive, who has been widely touted as a potential chairman of the independent Sky News, said he believed the agreements would safeguard Sky News's editorial independence because "journalists are naturally independent", but added that "the bigger issue is the economic viability of Sky News", shorn from its parent.
City experts said Murdoch could agree the terms of a �9.4bn takeover bid as early as 29 July. Observers believe Hunt is keen to give final confirmation by 19 July when the summer parliamentary recess begins ? although aides said the minister would not allow himself to be held hostage by the parliamentary timetable.
Chris Goodall, an analyst at Enders Research, argues the two sides are likely to reach agreement on price "within a month" of Hunt's final approval. Nick Bell, equity analyst at Jefferies, said that there was a strong possibility the two sides will reach the terms of agreement on price by 29 July to tie-in with BSkyB's financial results. But it was not completely clear if the spun off Sky News would be viable.
Source: http://www.guardian.co.uk/media/2011/jun/30/rupert-murdoch-bskyb-takeover-price
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