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BSkyB drops 4.6% as Murdoch bid referred to Commission

Shares in BSkyB (BSY.L) slumped again as the government referred News Corp's controversial bid to the Competition Commission.  

BSkyB drops 4.6% as Murdoch bid referred to Commission

(Update) BSkyB (BSY.L) shares clawed back some of their losses on Monday afternoon, but still ended the day down 4.6% at 693.7p, as investors digested a tumultuous day of news culminating in culture secretary Jeremy Hunt’s referral of News Corporation’s bid for the satellite broadcaster to the Competition Commission.

At one point the shares were below the original 700p per share offer made by News Corp last summer. 

News Corp put out a statement on Monday afternoon saying it was withdrawing its plan to spin off Sky News. ‘News Corporation continues to believe that, taking into account the only relevant legal test, its proposed acquisition will not lead to there being insufficient plurality in news provision in the UK,’ it said.

This was followed by Hunt’s statement in the House of Commons that he was going to refer the bid for BSkyB to the Competition Commission ‘with immediate effect’.

‘It will mean that the Competition Commission will be able to give further full and exhaustive consideration to this merger, taking into account all recent relevant developments,’ Hunt said.

Earlier today Hunt had written to Ofcom and the Office of Fair Trading asking if the phone hacking scandal at the News of the World - and its sudden closure at the weekend - affected the original submission by News Corp to buy the rest of BSkyB it does not own.

Hunt was already preparing to delay his decision on the bid until the autumn after receiving a huge number of objections by last Friday's deadline for responses.

BSkyB shares have plunged over the last week, falling heavily on Friday after media regulator Ofcom said it would consider whether News Corp was a ‘fit and proper’ owner of BSkyB. Not only could it block a deal it could also force News Corp to sell the 39% stake in BSkyB it already owns.

Is this a buying opportunity in BSkyB?

Analysts are divided on the chances the bid will still succeed.

Ian Whittaker, analyst at Liberum Capital, said there was a ‘very good chance’ News Corp would scrap the bid in the face of political and public hostility. 

‘Short-term reaction is the shares would likely fall but the 12% fall last week now means Sky is trading bang in line with the sector's performance since June 2010 when the bid was announced,’ he pointed out, writing in a research note before the market opened on Monday.

‘Given the strong operational performance of Sky, this could attract buyers back in,’ Whittaker added. ‘The one caveat is any sign that Sky is being affected by the downturn when the FY [full-year] results are reported on 4 August. But any further weakness could be a good entry point for fundamental investors.’

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7 comments so far. Why not have your say?

David Henry

Jul 11, 2011 at 12:13

Not sure if these wise fund managers in the city are fully aware of what the law says on the matter for corporate cover-ups and paying police for information. The Riper Act 2000 makes it a criminal offence not just for the individuals who hack into private communications Section 1 but also for the Corporate and senior management (James Murdoch) if there is evidence of ongoing criminal acts and that the management knew or should have known Section 79.

Clearly the later relates to all the senior management at News International. So all bets are off but its a fair bet that News Corp which owns News International will be investigated. 'Fit and Proper' will be the test they need to pass if they are to be allowed to take over BskyB and/or even keep a single share in a UK broadcast company. If that was to be the case then the shares are not worth the current trading price.

The British consumer has been exposed to wall to wall coverage in all media publications and now see's BSkyB as connected to hacking. Won't be too suprised if churn increase massively and profits head south. What does that do to a share price and value?

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William Phillips

Jul 11, 2011 at 13:33

Mr Patrick Yau, like many a City teenage scribbler, is naive about the wider world of politics and power beyond his beancounting and tapewatching tasks. Murdoch's deal was a dead duck by last night, and this morning's allegations that the NotW bribed a royal protection officer has buried it.

The question is now whether spreading awareness of such behaviour will contaminate News Corp's wider operations- in the USA and elsewhere.

Fox News and sleazy tabloids Stateside have made plenty of enemies, some in Congress. Murdoch could soon find himself fighting on a broader front than Fleet Street. Grandstanding pols have many opportunities to put malicious and vexatious spokes in his wheel, e.g. the USA's wide-ranging laws against organised crime could be stretched to make the octogenarian's last years unhappy.

Besides, if the majority stake in BSyB is so valuable to Rupert, why not to a rival without his taint? The independent directors had said his offer of seven quid a share for a mop-up was too cheap long before News's own paper and credit became devalued by the eruption of what was then only a bubbling scandal. The way is now clear for a rival offeror to ride in, and for a grateful Jeremy Hunt to fast-track the rescue while Parliament is on its protracted summer holiday.

Murdoch's buccaneering career is closing on a discordant diminuendo note. He now seems what some of us thought he was all along: the old man behind the curtain pretending to be the Wizard of Oz. He conned politicians into fearing his dead-tree media's overrated influence on public opinion and voting, while he extracted special treatment for his pyramidal, tax-avoiding, archaically dynastic conglomerate.

The Digger always posed as the fearless free-market battler, but in truth he was more hand in glove with politicians than most press lords, as a businessman whose business happened to be media-- and now his rulebending is back to plague him. Those he conned and bullied are out for payback.

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William Feader

Jul 11, 2011 at 14:20

Why would England even CONSIDER? allowing this little shit to purchase BSkyB?

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Dave R

Jul 11, 2011 at 14:22

B-Sky-B Are priced today at £7.01 down 49 pence Price earning Ratio 15.8

PEG 0.76 Growth Rate 20.8% Yield 3.07%

Are they overpriced well may be. but not not particularly over priced

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mo khan

Jul 11, 2011 at 18:27

Thus far BskyB have defended their position on the basis of valuation. Suggesting that if the right valuation were to come along, it may well consider it?

For circulation of news material in paper print via road distribution, As reader habits change.Titles produced by this method could well fade away. Ironicly the electronic media, that was heavily and freely promoted in paper print, became it’s own nemesis and by bidding for rest of BskyB, News press, swaps circulation figures for TV ratings figures to attract advertisers .

Alternatively News International owners News corp. could start it’s own Television network like Sky Television, which is where BskyB began, so we come full circle. Advertisers would of course divide and conquer and gain. But does, News press have the capacity, or appetite for licensing issues and compete from ground up etc.?

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Jul 11, 2011 at 19:18

Is this not a ploy by Murdoch to get out of the bid and save face?? He knows that the competition commission will reject the sale of BsBSky with the news channel inside it. This way it is not his withdrawal of the bid that make his organisation fail and he saves the Conservatives a lot of agony?

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colin grant

Jul 11, 2011 at 20:26

I imagine Murdoch has sold a load of his BSkyB shares already and will buy as many as he can through the back door when the price has finished dumping. This episode could actually save him money, although closing N.o.W will cost him plenty.

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