Under pressure because of the British phone-hacking scandal,
Rupert Murdoch's News Corp. on Wednesday said it no longer intends to make an
offer for the portion of British Sky Broadcasting Group it doesn't already own.
Government review of the proposed acquisition had been delayed by months
because of the scandal, which led to the closing of News Corp.'s newspaper News
of the World.
"We believed that the proposed acquisition of BSkyB by News Corporation
would benefit both companies but it has become clear that it is too difficult
to progress in this climate," said Chase Carey, president and chief
operating officer of News Corp. "News Corporation remains a committed
long-term shareholder in BSkyB. We are proud of the success it has achieved and
our contribution to it."
News Corp. shares dropped 11% as the phone scandal mushroomed over the past
week. There was concern that the issue might jeopardize News Corp.'s businesses
in America, notably its television station licenses, but most analysts said it
was unlikely the U.S. government would take any action
After the announcement News Corp. stock was up 2.67% to $16.51
near mid-day.
Analyst Michael Nathanson of Nomura Securities reacted to
News Corp.'s withdrawal by reiterating his buy rating on the stock.
"Perhaps this rebuke will force News Corp. to reconsider its
ownership of UK newspapers. We hope this
is a turning point for the company's strategy and asset allocation as the
ownership of highly inconsequential newspaper assets has forced the dropping of
a strategically important asset," Nathanson said in a research note.
"Despite this latest BSkyB setback, we still see value in
News Corp. shares with a 36% upside..
Our valuation did not include any additional BSkyB ownership. We believe investors will begin to shift back
to the fundamentals of the company as this bid uncertainty is removed,"
Nathanson said.
