UK government approves News Corp's controversial $14 billion takeover of BSkyB

The British government Thursday approved Rupert Murdoch’s News Corp’s acquisition of BSkyB.  The investment had drawn opposition from UK’s major media operators such as BBC, who objected on grounds that it would create a monopoly. With the approval, the investment is expected to radically change the UK’s media landscape.

The go ahead for the controversial $14 billion takeover offer came after News Corp's offer to spin off its Sky News unit into an independent company. The spin off was necessary to assuage competition concerns raised by the UK’s regulator, Ofcom over plurality. Under the spin off plans, Sky News will become an independent public company quoted on the London Stock Exchange with no News Corp employees on its board.

News Corp is understood to retain a 39% stake in Sky News and provide it with medium-term financial subsidy, however. Media mogul Murdoch already has immense influence over the British media market via his control of the UK’s number one tabloid, The Sun, as well as The Times, The Sunday Times and News of the World. This influence is set to strengthen considerably with the takeover of BSkyB.

However, the UK government will continue with its own consultations until the 21 March 2011. There had been concerns about the concentration of media outlets in the hands of one organization. News Corp is keen on acquiring the more than 61% of BSkyB that it does not currently own.

Culture Secretary Jeremy Hunt, responsible for deciding whether to allow the takeover, noted that the News Corp spin off of Sky News addresses concerns about media plurality. According to him, the undertakings offered would ensure that shareholdings in Sky News would remain unchanged, and indeed offer it more independence from New Corporation than it currently has. News Corp has proposed that shares in Sky News be distributed among existing shareholders, with Mr. Murdoch's company maintaining its 39% holding.

News Corp will be allowed to increase its shareholding without the permission from the culture secretary for 10 years. Hunt reiterated that he had followed independent advice throughout the decision making progress.

To make a sale of the news channel viable, Mr. Murdoch has also agreed to provide it with a long-term contract that will have the effect of subsidizing it for many years. Even if the deal gets the nod from Mr. Hunt, News Corp has yet to gain approval from BSkyB's board, reported BBC.

3 March 2011