BSkyB rallies as Murdoch backs off

Shares in BSkyB rallied today after Rupert Murdoch’s News Corporation withdrew its bid for the satellite broadcaster, lifting uncertainty over its future.

News Corp, which owns 39% of BSkyB, said continuing with the deal would be too difficult in the current climate but it will continue to be a long-term shareholder in the company.

BSkyB shares, which have slumped since it emerged that the bid might not go through, fell another 1% to 683.5p immediately after the announcement but finished 2% higher as uncertainty over the company’s future was lifted and analysts said they still represented good value.

News Corp tabled its 700p-a-share approach for the shares in BSkyB that it does not currently own in June last year, a move which valued the FTSE 100 Index company at around £12bn.

Shares hit 850p earlier this month on hopes of a deal with News Corp and after a series of strong updates, but slid 19% when it looked likely the phone-hacking scandal would scupper the bid.

Jeremy Darroch, BSkyB’s chief executive, said: “We remain very confident in the broadly based growth opportunity for BSkyB as we continue to add new customers, sell more products, develop our leading position in content and innovation, and expand the contribution from our other businesses.”

It was a similar story at News Corp where shares were up more than 2% in early trading but are still down 11% since the scandal erupted.

News Corp’s proposed bid for BSkyB in June last year came after more than 20 years as a major shareholder in the broadcasting giant.

It was hoping to tap into BSkyB’s strong cash generation and complement its own global empire of newspapers and media outlets, which include Fox News.

As a subscription-based business, Sky was attractive to News Corp as a way to reduce reliance on the volatile advertising cycle, while the move also offered a greater geographic spread away from its heavily weighted US interests.

Analysts believe BSkyB’s recent investment in new technology such as high definition and 3D television will help its profits double to around £1.7bn in 2015. The broadcaster recently celebrated reaching a milestone of 10 million television customers.

Having withdrawn its bid, News Corp will not be able to make another for six months.

Chase Carey, deputy chairman, president and chief operating officer of News Corp, said: “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.

“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’s bid sparked fierce opposition from its UK media rivals, who joined forces to form a media alliance in a rare show of solidarity to fight the deal.

They feared it was a play by News Corp to achieve unrivalled dominance, creating scale and wealth that would allow it to cross-promote television and newspapers.

Pressure on News Corp, which also owns the Sun and the Times newspapers, intensified yesterday when Prime Minister David Cameron joined all-party demands for the media mogul to drop the bid.