News Corp, BSkyB merger talks to resume

The UK government has given initial approval to News Corporation to resume takeover talks with BSkyB after Rupert Murdoch’s media group agreed to a spin-off Sky News.

Culture Secretary Jeremy Hunt earlier this year gave News Corp the opportunity to assuage concerns raised by media regulator Ofcom over the impact a merger with BSkyB would have upon media plurality in the UK.

Ofcom had recommended that News Corp’s proposed acquisition of the 60.9% of BSkyB it doesn’t already should be subject to the scrutiny of the Competition Commission.

But in a move that raised questions over protocol, Hunt in January said that while he accepted Ofcom’s views, he would give News Corp a chance to come up with remedies before deciding whether to put the deal through further regulatory scrutiny – something that would have prevented merger talks from resuming for another six months.

Speculation has been rife that News Corp would agree to spin off its Sky News channel in order avoid facing a Competition Commission enquiry. Today, Hunt said that this was exactly what was on the table and that he believed that this would address media plurality fears.

Hunt’s decision is still subject to a 15-day consultation, but under the terms of the agreement, Sky News would become a separate entity though BSkyB would retain a 39.1% share in the loss-making venture.

To ensure editorial independence and integrity in news reporting, the company would have a board made up of a majority of independent directors. Assuming News Corp’s acquisition of BSkyB goes ahead, the company would not be allowed to increase its shareholding in the new Sky News without permission from the Secretary of State for 10 years.

“I am consulting on proposed undertakings from News Corporation. Informed by advice from the regulators, I believe that these will address concerns about media plurality should the proposed News Corporation/BSkyB merger go ahead,” said Hunt.

“The undertakings offered would ensure that shareholdings in Sky News would remain unchanged, and indeed offer it more independence from News Corporation than it currently has.

“Throughout this process I have been very aware of the potential controversy surrounding this merger. Nothing is more precious to me than the free and independent press for which this country is famous the world over. In order to reassure the public about the way this decision has been taken I have sought and published independent advice at every step of the way, even when not required to do so by law. And I have followed that independent advice.”

The consultation period on Hunt’s latest decision comes to an end on March 21, after which time – should the government not have a radical change of heart – News Corp will be able to return to the negotiating table with BSkyB, whose share price rose 18% this morning in early hours trading to a 10-year high of 817p.