Agency: Bartle Bogle Hegarty
By James Taylor, managementtoday.co.uk, Monday, 11 July 2011 11:59AM
The chances of News Corp getting its hands on the 61% of BSkyB it doesn't already own have just got even slimmer, after Culture Secretary Jeremy Hunt decided to refer the deal back to Ofcom and the OFT. That's certainly what the market seems to think, given the hammering BSkyB shares have taken this morning - and it's hard to see this deal going ahead as long as the News of the World phone-hacking scandal continues to rumble on. We'd never bet against Rupert Murdoch getting his way eventually, but at the moment, he looks perilously short of political support. Must be a novel situation for him...
The Government's links to the scandal via Andy Coulson and its previous support for News Corp have left it in such an awkward position that it's clearly desperate to kick this issue into the long grass. Hunt had already said that it would (conveniently) take him months to wade through all the submissions he'd received. But now he's gone one step further: he wants the regulators to provide him with fresh advice on the consequences for media plurality of the closure of the NOTW, and - more damagingly for News Corp - on whether the revelations suggest that its previous assurances around the Sky deal can't actually be trusted. Ouch.
Hunt’s on pretty solid ground here; the closure of the Screws is clearly a big change to the media landscape, and it's not entirely clear whether it supports or undermines News Corp's case (i.e. will actually lose market share as a result?). What's more, it's perfectly reasonable to ask whether News Corp would now fall foul of the 'fit and proper' owner test. Murdoch presumably hoped to distance the company from the phone-hacking scandal by closing the NOTW, but that's going to be difficult if senior executives misled inquiries, and if ex-NOTW editor Rebekah Brooks remains in situ (and so far, she shows no sign of shifting).
Either way, there's clearly no appetite in the corridors of power to support the bid. With Labour is tabling a Commons motion on Wednesday calling for the bid to be delayed, the Tories can’t be seen to be backing Murdoch. Apart from anything else, given the rate the story seems to be developing, who knows what scandal might have emerged by the end of this week? So at least this move gives the Government a neat way to park the issue for a while until the situation is clearer and the dust has settled a bit. And, perhaps, an excuse to pull the plug altogether, if necessary.
So all things considered, it's easy to see why BSkyB shares plunged again this morning; they've now shed about 17% of their value (equivalent to £2.5bn) in the last week. The company is no less attractive a proposition – it's predicted to be churning out £1bn a year in cash by 2014 - but those hedgies who piled in expecting a takeover of 800p+ have clearly decided to cut their losses on the grounds that this isn't going to happen any time soon. Doesn’t your heart just bleed?
This article was first published on managementtoday.co.uk
Agency: Bartle Bogle Hegarty