Rupert Murdoch’s News Corporation announced Wednesday that it was withdrawing its $12-billion bid to buy complete control of the satellite giant British Sky Broadcasting, a move intended to calm the torrent of derision directed at the company since journalists at its British newspapers were implicated in a widespread phone-hacking scheme.
Whether or not the announcement will give the company any respite from the growing indignation and official investigations, it seems to have already altered not only the dynamics within one of the world’s most powerful and profitable media companies but also, possibly, the future of the newspaper business within the News Corporation.
The decision to withdraw the bid for BSkyB, as the satellite broadcaster is known, was made as a contentious family drama played out in recent days. James Murdoch, a leading contender to replace his father as chairman and the driving force behind the News Corporation’s bid to take over BSkyB, argued that the company should press for regulatory approval of the deal, said three people with knowledge of the discussions who declined to be identified because they were revealing confidential company deliberations.
But Rupert Murdoch and the News Corporation’s chief operating officer, Chase Carey, overruled the younger Murdoch, consulting him only after the decision was all but final.
The deal to buy the remaining 61 per cent of BSkyB that it did not own was the single biggest ever attempted in the long history of the News Corporation, and the withdrawal is perhaps the most significant setback of Rupert Murdoch’s career. Yet Murdoch is said to remain hopeful that the transaction is salvageable. One person involved in the discussions said that the News Corporation chairman saw the withdrawal as a way to mollify his critics while waiting for the anger to die down.
“Rupert is thinking long term here, I don’t think he believes this deal is dead,” said this person, who did not want to be named while discussing confidential matters. “He’s just looking for ways to relieve pressure for the moment, to give this some breathing room. He fundamentally believes News Corp can bounce back.”
In a statement released Wednesday, the News Corporation acknowledged that the mood in Britain had become too hostile to pursue the BSkyB purchase. “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,” Carey said. But in its statement, the company said it reserved the right to make another bid. The announcement is particularly fraught for James Murdoch, who ran BSkyB from 2003 to 2007. He has been the principal champion of the BSkyB purchase within News Corporation, pressing both his father and the company’s board to go along with the deal.
With BSkyB reporting to James, who runs the News Corporation’s European and Asian operations, the businesses in his portfolio would account for half of all the News Corporation’s revenue.
©2011 The New York Times News Service