News Corp won't rush into asset sales

With its bid for broadcaster BSkyB withdrawn, News Corp is turning its attention to fighting the political and legal fall-out of the UK phone hacking scandal and is unlikely to rush any decision on asset sales.

Chief executive Rupert Murdoch and his management team have closed the scandal-hit tabloid News of the World and aborted the $12-billion deal to take over BSkyB, taking care of the two most pressing business issues before the company.

The aborted BSkyB bid will cost Wall Street banks about $80-million in lost advisory fees, according to Thomson Reuters and Freeman Consulting.

Any asset disposals such as a possible sale of News International—the unit that holds British newspapers—are a lower priority now than dealing with the political upheaval and regulatory probes in Britain, a source close to the situation said.

“First thing you have to determine is who did what. Did Murdoch violate the law? And who knew about it? And then you determine what is the remedy to any of all that,” said an industry banker who is not involved in the situation.

Investors have been clamoring for years for News Corp to rid itself of its newspaper assets, which are seen as a drag on the company’s performance because of low growth. But Murdoch has remained steadfast in his refusal to sell newspapers, such as The Times of London, The Sunday Times and The Sun.

The crisis may eventually force Murdoch’s hand, but for now even finding a buyer willing to take on the newspaper business would be a stretch, several industry bankers said.

Potential buyers could include publisher Richard Desmond, who owns Express Newspapers and UK’s Channel 5 television station, and Russian tycoon Alexander Lebedev, one of the bankers said.

But Lebedev, who owns British newspapers including the Independent and London’s Evening Standard, told Reuters this week that he is not interested in buying Murdoch’s publications.

Desmond wasn’t available for comment after-hours.

“If they decided to sell their newspapers, I don’t know anyone who would want to buy them with the cloud hanging over them,” a second banker said.

Wall Street’s loss
News Corp’s decision to pull the bid for the BSkyB stake it did not already own means advisers on the deal will now make only about 10% of the potential fee pool of $90 million, according to Freeman Consulting.

Morgan Stanley, UBS and Bank of America Merrill Lynch advised BSkyB, while Deutsche Bank and JPMorgan Chase & Co advised News Corp.

BSkyB is still considered a strategic asset in which News Corp will remain a controlling shareholder, several media bankers not affiliated with the deal said.

“They are hoping ...
over the next three or four years, when things have calmed down, they will be in a position to come back [to the deal],” one banker said.

But it could be some way off, if ever, that News Corp feels brave enough to try to buy the rest of BSkyB again, the banker said. - Reuters

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