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Rupert Murdoch's News Corp. drops bid for BSkyB

Political and public outrage over the phone-hacking scandal involving some of its newspapers forces News Corp. to withdraw its $12-billion offer to take over Britain's biggest satellite broadcaster.

July 14, 2011|By Henry Chu, Los Angeles Times
  • A News Corp. sign is displayed in front of the company's offices in New York City. The media giant withdrew its offer to take over Britain's biggest satellite broadcaster in wake of a phone-hacking scandal tied to some of its newspapers.
A News Corp. sign is displayed in front of the company's offices in… (Bloomberg )

Reporting from London — Media mogul Rupert Murdoch's latest effort at damage control, abruptly shelving his bid to take over Britain's biggest satellite broadcaster, shows no sign of turning back the rising tide of public anger against him and his giant News Corp.

The decision to ditch the $12-billion bid, at least temporarily, was a humiliating turnaround for Murdoch, who is struggling to keep the fallout from a deepening newspaper phone-hacking scandal from contaminating the rest of his global media empire. Taking control of BSkyB, of which Murdoch's News Corp. already owns a 39% share, was the linchpin of his corporate expansion plans in Britain.

But intense pressure from politicians and ordinary Britons made forging ahead with the bid untenable, and could even wind up threatening Murdoch's hold on other media properties in Britain. Among them are some of the nation's top-selling newspapers, which have served for decades to strengthen his political influence.

Through Facebook and Twitter, Britons have urged each other to boycott Murdoch-owned publications such as the Sun and the Times of London, which have apparently lost tens of thousands of readers as a result. A grass-roots campaign called Hacked Off, whose supporters include actor Hugh Grant, is pressing the government to get to the bottom of the phone-hacking scandal.

The nation erupted in indignation last week over allegations that the News of the World tabloid had hacked into the cellphones not just of movie stars and celebrities but of crime and terrorism victims as well. The newspaper is accused of intercepting and deleting voicemail messages left on the phone of Milly Dowler, a 13-year-old who was kidnapped in 2002 and later found slain.

The Dowler family has become the face of ordinary Britons caught up in the country's aggressive tabloid wars. Eager to be seen on the Dowlers' side, the leaders of all three main political parties met with the family this week, including Prime Minister David Cameron on Wednesday.

In the House of Commons, Cameron announced the appointment of a senior judge to lead an official inquiry into the practices of the News of the World and other British papers, which is likely to keep the hacking scandal in the public eye for months. Rebekah Brooks, the head of News International, News Corp.'s British subsidiary, has herself warned of more shocking revelations to come.

And politicians who once avidly curried Murdoch's favor, or at least tried to avoid his ire, are rising up nearly as one to disavow him and his business dealings.

"Rupert Murdoch has considerable achievements to his name.... But it is the case that he is now going to be forever tarred with the revelations of what has happened in his papers," declared Conservative lawmaker John Whittingdale.

In a terse statement outlining the decision to drop the BSkyB bid, News Corp. Deputy Chairman Chase Carey said, "It has become clear that it is too difficult to progress in this climate."

Besides abandoning the bid for BSkyB, the company has shut down the News of the World. Some analysts say News Corp. may be forced to shed the rest of its publishing interests in Britain if it wants to shore up its reputation and have a shot at reviving its attempt to gain control of BSkyB. The lucrative pay-TV enterprise recorded an operating profit of $1.27 billion for the nine months ending in March of this year.

Buying up the remaining 61% of the broadcaster was to be the 80-year-old Murdoch's crowning achievement, cementing his position as a major media force on three continents: Europe, his native Australia and North America, where News Corp. owns Fox News and the Wall Street Journal, among other properties.

Under British law, a new takeover bid for BSkyB could be submitted in six months. But News Corp. will probably have to wait until an inquiry that could take as long as two years is complete before relaunching a takeover attempt.

News Corp.'s print holdings in Britain are of minor importance to the company's bottom line; indeed, some investors have long encouraged Murdoch to jettison them and concentrate on broadcast media. But doing so would shrink Murdoch's media footprint here and whatever political influence he has left.

"The newspapers are more important to Murdoch than what they provide to his balance sheet. The newspapers have been the source of his political power, and he has used that power to build an empire," said Doug Creutz, media analyst with investment banking firm Cowen & Co. "Getting rid of more newspapers would be a tremendous blow to him personally."

Adding to the negative publicity, the hacking scandal jumped across the Atlantic on Wednesday when four Democratic senators, including California's Barbara Boxer, called on authorities to investigate whether publicly traded News Corp. violated the Foreign Corrupt Practices Act when the News of the World allegedly bribed British police officers for information.

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