Rupert Murdoch, savaged in parliament, pulls BSkyB bid

Rupert Murdoch, News Corp. chairman and owner of News of the World.
LIONEL BONAVENTURE

Rupert Murdoch withdrew his bid for British broadcaster BSkyB on Wednesday in the face of cross-party hostility in parliament following allegations of widespread criminality at one of his tabloid newspapers.

The move pre-empted by a couple of hours a planned vote in parliament that had all-party support for a non-binding motion urging the Australian-born media magnate to drop a buyout offer which was a major part of his global expansion in television

“News Corp announces that it no longer intends to make an offer for the entire issued and to be issued share capital of … BSkyB not already owned by it,” the U.S.-listed parent of the global media empire said.

News Corp owns 39 percent of BSkyB, which owns Sky News and a range of profitable pay-TV channels.

“It has become clear that it is too difficult to progress in this climate,” deputy chairman Chase Carey said in a statement, adding that News Corp would remain “a committed long-term shareholder.”

Prime Minister David Cameron, who has faced awkward questions about his own relations with Murdoch, welcomed the news: “The business should focus on clearing up the mess and getting its own house in order,” he said through a spokesman.

Opposition Labour leader Ed Miliband said it was a victory for those who had opposed the extension of Murdoch’s power.

Earlier, Cameron told parliament Murdoch should drop the bid while police investigated allegations that the News of the World hacked the voicemails of thousands of people looking for stories and also bribed police officers for information.

The press baron, who for decades has been both feared and courted by British politicians of all parties, shut down the 168-year-old Sunday tabloid last week in an effort to stem the scandal and save the BSkyB bid. But there was no stopping the flow of allegations and it had looked politically untenable.

Summoning a degree of national unity rarely seen outside times of war, all parties were due to endorse a motion later on Wednesday in parliament that was to urge Murdoch to drop it. It was unclear if that formal vote would now go ahead, after hours of debate in which hostility to Murdoch was unanimous.

GOVERNMENT OPPOSITION

The four-sentence statement, highlighting News Corp’s commitment to BSkyB, leaves the door open to a new offer to buy out the other shareholders at some point in the future, although many months of police investigation and a public inquiry will keep the scandal alive for a good time yet.

Chris Marangi, portfolio manager at Gabelli Multimedia Funds, which holds shares in News Corp, said: “This is not surprising, it doesn’t mean the desire’s not there.

“It’s politically savvy, and he needs to buy his time and let this blow over … At the time, it’s circle the wagons and protect existing operations.”

Several former employees of Murdoch’s British newspaper unit News International have been arrested this year after police reopened inquiries which they had dropped in 2007 following the conviction of the News of the World’s royal correspondent.

Those under suspicion of phone hacking and of bribing police include former editor Andy Coulson, whom Cameron hired as his spokesman in 2007 after the hacking scandal first broke. Coulson left the prime minister’s office in January and, like other News of the World staff, denies knowing of any wrongdoing.

In the most senior departure from the organization since Coulson, the legal manager of News International, Tom Crone, has left the company, a source familiar with the matter told Reuters. He has been closely involved in the company’s defense.

That for years consisted of blaming the “rogue reporter” jailed in 2007 but has shifted to accept possibly wider problems since police renewed their investigation under public pressure.

Cameron told a stormy weekly questions session in parliament that Murdoch should drop the bid: “What has happened at the company is disgraceful. It’s got to be addressed at every level and they should stop thinking about mergers when they’ve got to sort out the mess they’ve created.”

Facing new questions about why he hired Coulson, Cameron repeated that he had believed his assurances of innocence. But he warned that his former aide, if found to have lied to him, “should like others face the full force of the law.”

Giving details of a formal public inquiry into the affair, to be chaired by a senior judge, Brian Leveson, Cameron said that senior executives, however high in the Murdoch organization, should be barred for life from the British media if found to have taken part in any wrongdoing.

Cameron has previously said Rebekah Brooks, Coulson’s predecessor at the News of the World and now Murdoch’s close aide as chief executive of News International, should quit. Brooks has been a frequent guest at Cameron’s country home.

MURDOCH POWER

While some analysts said it was too early to declare that his business was in serious retreat in Britain, many said that the sweeping political influence Murdoch had enjoyed over both left and right in politics seemed most suddenly curtailed.

Support for a motion put forward by the Labour opposition was solid across the normally bitter divides of the House of Commons, including from Cameron’s Conservatives who had, previously, given their blessing to the BSkyB takeover.

“For decades now, successive prime ministers have cozied up to Murdoch,” said politics professor Jonathan Tonge of Liverpool University. “Now it’s a new era.

“Political leaders will be falling over themselves to avoid close contact with media conglomerates. This is a turning of the tide — it’s parliament versus Murdoch at the moment.”

Others, however, were cautious.

“In the medium to longer term, the natural order will reassert itself,” said Steven Fielding, politics professor at Nottingham University. “People will forget what the News of the World did … and that people’s desire for tittle tattle, regardless of how it is found, will remain.

“Ultimately there’s a reason why politicians sucked up to Rupert Murdoch and to others … They inherently need to get on well with the press.”

News Corp’s share price has fallen sharply, and the company has extended a share buyback scheme. Some investors have renewed calls for the Murdoch family to cut emotional ties to struggling newspapers on which their empire was built in order to focus on expansion in television and other media.

News Corp shares rallied some 1.7 percent after the $12-billion bid was pulled. BSkyB shares, which have lost a fifth of their value in a week, edged another 0.4 percent lower.

INTERNATIONAL FALLOUT

The fallout from the scandal threatens to spread to the United States, where Murdoch owns The Wall Street Journal, the New York Post and Fox television. John Rockefeller, chairman of Senate’s commerce committee, called for an investigation to determine if News Corp had broken any U.S. laws.

Rockefeller said he was concerned by allegations that the hacking of cellphone voicemails, acknowledged in London by News Corp, “may have extended to 9/11 victims or other Americans,” in which case he said “the consequences will be severe.”

In Australia, birthplace of the Murdoch business, the head of the local unit News Limited said it was launching an internal inquiry but insisted he had “absolutely no reason to suspect any wrongdoing” of the kind seen in Britain.

Cameron on Wednesday met the parents of Milly Dowler, a 13-year-old girl abducted and murdered in 2002, whose cellphone is alleged to have been hacked by the News of the World.

It was that revelation in a rival newspaper last week which shocked the nation and drove events forward amid a whirlwind of further allegations. These included that the phones of parents of soldiers killed in combat and those of the victims of the July 2005 London suicide bombings were also targeted.

Cameron said he wanted to pledge to the Dowlers that all the political parties would act to close this “ugly chapter.”

Many politicians believe that journalistic misdeeds have not been restricted to News International. Allegations surfaced this week of possible phone hacking by other tabloids and police raided the offices of the Daily Star last week.

That has increased pressure for formal regulation of the British press which, while restricted by draconian defamation laws, is otherwise subject to a voluntary code of conduct.

Murdoch, his son James and Rebekah Brooks, the former News of the World editor who is now chief executive at News International have been summoned to answer questions by a legislative parliamentary committee next week.

As a U.S. citizen, Murdoch need not attend.



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