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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.
(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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