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BSkyB shares steady after News Corp pulls bid as predicted following phone hacking furor
LONDON (AP) ' Shares in British Sky Broadcasting Group PLC held steady after Rupert Murdoch's News Corp. pulled its takeover bid for the company in the face of vociferous opposition in the U.K. parliament.
In mid afternoon trading Wednesday, BSkyB shares were trading only 0.2 percent lower on the day at 691 pence ($11.09), more or less where they were just before News Corp. said it was pulling its bid.
In the immediate aftermath of the statement, the shares tanked to a low of 665 pence, but that knee-jerk sell-off proved short-lived as investors had already concluded that the bid was dead in the water given the toxic political environment.
"I think it's making official what most people expected," said Sam Hart, media analyst at Charles Stanley.
News Corp.'s move was the latest development in a phone hacking and bribery scandal at the News of the World, which the company closed last Sunday after 168 years. The furor generated by revelations that the tabloid was hacking the phones of potentially thousands of people, including a murder victim.
Even the traditionally partisan British politicians were planning to band together later Wednesday in a vote urging News Corp. to pull its bid. Earlier, Prime Minister David Cameron confirmed there would be a judge-led inquiry into the scandal.
Given that backdrop, it's hardly surprising that the Nasdaq-listed company decided the game was up.
"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, News Corp.'s deputy chairman.
Investors seemed relieved by the news, and pushed shares in News Corp. up 1.7 percent higher to $16.34.
Though the failure to clinch the remaining 61 percent stake in BSkyB probably marks the biggest corporate failure in Murdoch's career, he and his family are unlikely to give up their hopes of taking full control of what is now Britain's biggest media company.
Carey said as much: "News Corporation remains a committed long-term shareholder in BSkyB."
Charles Stanley's Hart said News Corp. may well be back to resurrect its BSkyB ambitions once the police investigation in the phone hacking scandal has been completed.
In the meantime, he said he wouldn't be surprised to see News Corp. continue to invest in the company, as it generates "tremendous" amounts of cash and is forecast to be debt-free by the end of the 2013 financial year.