BSkyB/News Corp: Rupert Murdoch’s grip on UK media looks set to tighten, after winning the British government’s backing for remedies that pave the way for News Corp to take full control of satellite operator BSkyB. But the agreement to spin off Sky News is messy. It fails to address concerns over plurality and lacks crucial financial detail.
The ideas are disappointingly bland. News Corp promises to make Sky News an independent listed entity within nine months of closing any deal. As a standalone company, Sky News will have an independent chairman and a majority of independent directors, as well as a committee to protect editorial independence. But News Corp will continue to hold a big stake — albeit of no more than 39.1 per cent, reflecting its current ownership of BSkyB.
History suggests that Murdoch can continue to exert influence despite such mechanisms. His acquisitions of The Times in 1981 and then later the Wall Street Journal in 2007 were each accompanied by assurances not to interfere. But it didn’t take long for senior editors to leave the newspapers.
Murdoch, and the UK government, have also failed to disclose the exact mechanics of the separation process. News Corp could make an offer for BSkyB that includes a cash sum plus a share in Sky News, resulting in an immediate spin-off. An alternative might be to make a full cash offer and then later launch an initial public offering of Sky News. Both are problematic.
True, Sky News is a small part of BSkyB and might be worth less than 10 pence in the 819 pence per share at which BSkyB currently trades. But it is difficult for shareholders to judge the value of a share in Sky News without any financial detail of the 10-year carriage agreement. It’s even harder to imagine why investors would buy into any IPO of a business that is currently estimated to make a loss of £20 million a year. These awkward questions have not stopped Murdoch getting what he wants out of the Conservative-led government he backed in the last elections. But the media mogul will still have to come up with a price to convince independent BSkyB shareholders to hand over his prize. The current offer of 700 pence looks well short.
