News Corp Takes Stock After BSkyB Bid Dropped

News Corporation (NasdaqGS: NWS - news) is taking stock today after withdrawing its bid for full control of BSkyB (LSE: BSY.L - news) .

The company abandoned the deal after deciding it was untenable in the wake of the phone-hacking scandal.

A senior source who had been working on the offer told Sky's City editor Mark Kleinman the situation had become "too politicised" for News Corp to move forward.

"My disclosure that News Corp had withdrawn its interest in taking over BSkyB feels, with hindsight, like an inevitability given the escalating scandal," commented Kleinman.

The announcement came just hours before MPs (BSE: MPSLTD.BO - news) were expected overwhelmingly to back a Labour motion condemning the takeover plans.

The decision was later confirmed by the media group, which said the "current climate" prevented a further approach.

Prime Minister David Cameron welcomed the announcement, saying: "I think this is the right decision.

"I have been saying that this company clearly needs to sort out the problems there are in News International and at the News Of The World - that must be the priority, not takeovers.

"So, the right decision but also the right decision for the country too. We have now got to get on with the work of the police investigation and the public inquiry that I have set up."

Labour leader Ed Miliband described the decision as "a victory for people up and down this country who have been appalled by the phone-hacking scandal".

Speaking in the House of Commons in the debate originally designed to call for an end to the News Corp bid, Mr Miliband said: "Make no mistake, the decision made by News Corp was not the decision they wanted to make.

"It may have been announced before this debate but it would not have happened without it."

Explaining why the debate was still going ahead, he added: "This debate is an opportunity to understand how we got here and where we go from here."

A statement confirming the move by News Corp read: "News Corporation announces that it no longer intends to make an offer for the entire issued and to be issued share capital of British Sky Broadcasting Group PLC ("BSkyB") not already owned by it."

News Corp has a 39% stake in BSkyB and had been trying to buy the remaining shares, having tabled a 700p-a-share offer in June last year.

Deputy chairman Chase Carey commented: "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 Corp remains a "committed long-term shareholder in BSkyB", he said.

Kleinman noted that by issuing the statement, News Corp would be prohibited from bidding for the part of BSkyB it does not already own for at least six months under the rules that govern takeovers.

He added that the withdrawal was very bad news for hedge funds who had piled into BSkyB shares, hoping for a knockout bid.

Commenting on the decision, Sky's political editor Adam Boulton said: "To answer the question 'has News Corp outmanoeuvred the Government?', one would have to say comprehensively, no.

"Remember the acquisition of BSkyB - which would have been the biggest and single most profitable division within News Corp - was the strategic plan for the future.

"It was the growth plan for the future and effectively the succession plan."

Boulton added that the situation had been a "trial of strength" in which public and political opinion had prevailed over corporate strategy.

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