In an extraordinary twist, News Corp has done today what it has spent months trying to prevent, and has forced the UK government to refer its £9 billion deal to buy BSkyB outright to anti-trust regulator the Competition Commission. This will delay the deal for months. But crucially, it means that News Corp does not have to drop its bid entirely.
Jeremy Hunt, the UK culture secretary, had no choice but to stand up in the House of Commons this afternoon and announce he was referring the BSkyB deal to the anti-trust regulator. Hunt said the move would address the “abuses of power” that have dogged the biggest deal of Rupert Murdoch’s career. Hunt may have presented what he was doing as a victory for tough government, but the truth is that’s exactly what the Murdochs now want: They believe they will be cleared of having too much media ownership if they buy BSkyB outright. Europe’s anti-trust regulator has already cleared the deal on competition grounds. News Corp has withdrawn its offer to spin off Sky News as a separate entity. Previously, FCC-equivalent Ofcom said that spinning off Sky News would be enough to swing the deal in its eyes.
Hunt is desperately rowing back from his previously sympathetic attitude towards the BSkyB deal. He has ambitions to be Prime Minister and has finally realized that the mushroom cloud rising over News International, News Corp’s UK newspaper arm, could affect his political ambitions, I’m told. Hunt has written to other regulators, asking them whether they want to reconsider their original go-ahead for the bid. Ofcom still has the ability to scupper the deal if it decides that News Corp is not a fit and proper owner for BSkyB. Since its original advice, press regulator the Press Complaints Commission said it was lied to by News International, James Murdoch has admitted serious wrongdoing and there are allegations of a cover-up stretching back to 2007.
BSkyB shares were down 7.5% this afternoon at 694p per share — well under the 700p per share that News Corp originally offered for the 61% of the pay-TV behemoth it does not already own.
Meanwhile, senior UK politicians are putting pressure on Ofcom to intervene and block the bid. They see the opposition Labour Party making political capital out of the government’s close links to the Murdochs. Ed Miliband, leader of the Labour Party, has called on Rupert Murdoch to drop the BSkyB deal, calling it “untenable.” Opposition politicians are planning to vote against the takeover on Wednesday. Liberal Democrat MPs, who are in coalition with the Conservatives, also plan to vote against the deal. Deputy Prime Minister Nick Clegg, a Liberal Democrat, has already called on Rupert Murdoch to drop the takeover. In his marvelously British way, Clegg told the BBC that Murdoch should “do the decent thing” and reconsider the bid.