News Corp, BSkyB shares fall after phone-hack row

Shares in News Corporation and BSkyB fell as the News of the World phone hacking scandal put Rupert Murdoch, and his bid to take control of the satellite broadcaster, under fresh scrutiny.

News Corp shares fell on Wednesday by 3.3%% in early trading on Wall Street to $17.56, (£11) as United States investors reacted to the latest developments. BSkyB shares fell as low as 818p in London, a fall of more than 3% or 27p.

BSkyB shares came under pressure after Labour leader Ed Miliband called during prime minister’s questions in the Commons for News Corp’s takeover offer to be referred to the Competition Commission, a move that could potentially thwart Murdoch’s ambitions.

The satellite broadcaster’s shares had previously been changing hands for 850p on Monday afternoon, before the Guardian revealed that missing schoolgirl Milly Dowler’s voicemail had been hacked by News of the World journalists.

The culture secretary, Jeremy Hunt, gave the provisional go-ahead for the deal last Friday, subject to a final seven-day consultation over plans to spin off Sky News as a separately listed company to allay plurality fears. The consultation closes at midday on Friday, 8 July.

Traders in the city believe Murdoch’s bid to buy the 61% of Sky not already owned by News Corp will probably still succeed, but are also aware of the possibility of further evidence about phone hacking emerging.

“It’s hard to believe that the phone-hacking scandal could directly put the BSkyB bid in jeopardy, but it all depends on what future front-page revelations we see, and the strength of the voices against News of the World,” said Joshua Raymond, chief market strategist at City Index. Raymond believes investors would push BSkyB’s price below 800p if they believed the bid was under serious threat.

Louise Cooper, market analyst at BGC Partners, said city traders are confident the BSkyB deal will proceed. According to Cooper there has been heavy trading in BSkyB shares on Wednesday, nearly three times as much as usual.

A long-running bid
News Corp’s bid to take full control of BSkyB — it already owns 39% of the company — had appeared close to success last week after the United Kingdom government accepted various conditions, including splitting Sky News as a separate company. The latest twists in the hacking scandal, though, have led to calls for the bid process to be suspended.

Prime Minister David Cameron rejected Miliband’s call for a Competition Commission review, insisting that the government was following the correct legal processes.

News Corp launched its takeover bid for BSkyB more than a year ago, offering 700p per share. This was rebuffed as too low, with shareholders initially suggesting that a successful bid would need to value the broadcaster at upwards of 800p per share. One investor, hedge fund manager Crispin Odey, had reportedly set his heart on £11 per share. Before News Corp made its move, BSkyB shares were worth around 600p.

Sources close to the culture secretary — who will decide on the issue — have indicated that he could not take phone hacking into account in the decision that is focused on “media plurality”.

The media regulator, Ofcom, said in a statement it has a duty to be satisfied on an ongoing basis that the holder of a broadcasting licence is “fit and proper”.

“It is clearly not for Ofcom to investigate matters which properly lie in the hands of the police and the courts, however we are closely monitoring the situation and in particular the investigations by the relevant authorities into the alleged unlawful activities,” said the communications regulator.

Some commentators believe the issue of a new fit-and-proper persons test could force BSkyB to demand a higher price from News Corp. —

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever. But it comes at a cost. Advertisers are cancelling campaigns, and our live events have come to an abrupt halt. Our income has been slashed.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years. We’ve survived thanks to the support of our readers, we will need you to help us get through this.

To help us ensure another 35 future years of fiercely independent journalism, please subscribe.


Eastern Cape schools to only open for grades 3, 6...

The province says the increase in Covid-19 cases has made it re-evaluate some decisions

Malawi celebrates independence day, but the first president left his...

The historical record shows that Malawi’s difficulties under Hastings Banda were evident at the very moment of the country’s founding

Gauteng health MEC Bandile Masuku’s first rule: Don’t panic

As Gauteng braces for its Covid-19 peak, the province’s MEC for health, Bandile Masuku, is putting his training to the test as he leads efforts to tackle the impending public health crisis

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday