Newspaper article The Evening Standard (London, England)

Murdoch Could Reach for Sky with UK Papers Sell-Off

Newspaper article The Evening Standard (London, England)

Murdoch Could Reach for Sky with UK Papers Sell-Off

Article excerpt

Byline: Jim Armitage Deputy Business Editor

AS soon as the Milly Dowler phone-tapping allegations emerged at the start of last week, a precipitous slide in the BSkyB share price was inevitable. No matter how much regulators quibbled that their remit for assessing the News Corp takeover was unaffected -- "we're only here to judge media plurality" -- it seemed obvious that politically, a takeover could not now be waved through for a very long time.

So it was no surprise to see the hedge funds make their excuses and leave. As we reported during Friday's big sell-off, most of these hedgies had bought into the stock solely in the short-term expectation of seeing a swift takeover at a richer price than the shares indicated.

They were right to sell: this deal will not now go ahead for at least another year -- well beyond their investment timescale.

But longer-term punters should think again. Sky's shares are now around Rupert Murdoch's original offer of 700p, having started last week at nearly 850p. That reflects the growing consensus that this deal will never get done.

But, as ever with markets, it exaggerates the threat and underestimates News Corp's desire for Sky. Essentially, News Corp is a vastly profitable, fastgrowing, global broadcasting and movie empire with a newspapers subsidiary.

Within that subsidiary, by some accounts, only about 10% of profits come from the UK.

Meanwhile, Sky is entering the most dramatic profit growth phase of its history, having spent years of heavy investment getting the technology in people's homes ready for its panoply of new digital services. This is too rich a prize for News Corp's US management to let go for the sake of a relatively small stable of papers in the UK.

With the closure of the News of the World, we've seen that News Corp management -- be it James Murdoch or the twiddly-moustached Chase Carey behind the scenes -- is prepared to take dramatic, unsentimental action to rescue the Sky takeover. …

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