Business

BSkyB shares drop on Jeremy Hunt letter

  • 11 July 2011
  • From the section Business

BSkyB shares have fallen in London on fresh doubts about whether News Corp will be allowed to take it over.

The shares fell by as much as 7% before closing 4.6% lower at 715.5 pence.

The fall came after it emerged Culture Secretary Jeremy Hunt was writing to regulators to ask for fresh guidance on whether News Corporation should be allowed to take over BSkyB.

At one point, BSkyB shares fell below the 700 pence level that News Corp offered for them in June 2010.

When News Corp - which owned the News of the World - made its original takeover approach, BSkyB's board told News Corp to come back with a higher offer.

BSkyB's shares have risen as high as 850 pence in the past year on hopes that there would be a higher bid.

In New York, News Corp shares fell more than 7%.

'Think again'

Also on Monday, Deputy Prime Minister Nick Clegg called on Rupert Murdoch not to bid for BSkyB.

"Do the decent and sensible thing, and reconsider, think again, about your bid for BSkyB," he said.

After meeting the family of Milly Dowler, the murdered schoolgirl whose phone was allegedly hacked while she was missing in 2002, he said these "grotesque journalism practices" had led to public revulsion.

Later, commenting on the latest revelations about News International paying police for the Royal Family's phone details, Labour leader Ed Miliband said it "casts a further cloud over that organisation" and makes the bid for BSkyB "more untenable".

"That is why I say very clearly to Mr Murdoch that he should withdraw the bid. I don't think it is conceivable in the current circumstances that it would command public support."

Mr Miliband has demanded that the BSkyB bid be referred to the Competition Commission, and said the government could not rely on assurances from News Corp executives in the wake of the hacking scandal.

He has put down a motion calling for the bid to be delayed until the criminal investigation is completed and is seeking support from the Liberal Democrats and some Tories.

Mr Miliband claimed Mr Hunt had ignored Ofcom's original advice to refer the matter to the Competition Commission and he added: "The government, having repeatedly said there was no alternative to their flawed process, now appears to be moving towards my position."

A Downing Street spokesman said the prime minister would not be making any public comment on the BSkyB bid, as he had no role to play in the decision.

News Corp currently owns 39% of BSkyB.

BBC business editor Robert Peston said: "The importance of Mr Hunt's letter is in the generality: it is all a pretty clear hint that Mr Hunt might after all decide to refer the takeover to the Competition Commission for lengthy examination."

The culture secretary is to ask the media regulator Ofcom and the competition regulator, the Office of Fair Trading, whether the disclosure that News Corp's News of the World business was out of control for many years is reason to doubt that undertakings given by News Corp to protect the independence and financial strength of Sky News are credible and sustainable.

In his letter to Ofcom and the Office of Fair Trading, Mr Hunt writes: "I would be grateful if you could indicate whether this development (and/or the events surrounding it) gives you any additional concerns in respect of plurality over and above those raised in your initial report to me on this matter received on 31 December 2010."

He goes on to ask if last week's events caused them to reconsider previous advice about the "credibility, sustainability or practicalities of the undertakings offered by News Corporation".

It previously looked likely that Mr Hunt would clear the proposed takeover as long as Sky News was made independent, but still financially supported by BSkyB.

But on Friday, Ofcom declared that it would take a view, after police and court investigations had been completed, about whether News Corp would be a fit and proper owner for the whole of BSkyB.

Our business editor described the statements as a "big obstacle" in the way of the takeover.

"For Mr Hunt to suggest that News Corp might not be a fit-and-proper owner of anything is a pretty big shift from the prevailing - and some would say fawning - attitudes towards Mr Murdoch we've witnessed from British governments in recent years," he said.

Related Internet links

The BBC is not responsible for the content of external Internet sites