INVESTORS IN companies controlled by media tycoon Rupert Murdoch have been dumping the shares amid fears on both sides of the Atlantic over the fallout from the phone-hacking scandal at the News of the World.
Shares in satellite broadcaster BSkyB are down 5 per cent in the past week, wiping some £666 million (€740.9 million) off the value of the business, while News Corporation had lost 2.6 per cent, slicing some $400 million (€278.6 million) off the value of the News of the World's ultimate parent company.
Many hedge funds which had bought into BSkyB in the hope of making a quick profit from the bid have been selling the shares on fears that the deal now faces substantial delay.
News Corp, where Murdoch is chairman, wants to acquire the 61 per cent stake in BSkyB it does not already own. Analysts say the move will eventually yield far more profit than the money the media mogul had been making from the News of the World.
But the threat to the BSkyB deal has rattled shareholders.
Analyst Sam Hart at Charles Stanley said: “BSkyB’s shares are off nearly 5 per cent at 812p because there are worries the deal will be delayed, or worse still, blocked. My own view is that it will go through, but others are less sanguine.”
The biggest concern for shareholders was a statement yesterday from Ed Richards of UK regulator Ofcom, which said its “fit and proper test” to ensure that media groups adhere to high standards of behaviour was “an ongoing duty . . . that is not linked to any particular event, merger or transaction. It’s a generalised duty.”
However, he made it clear that there was no question of intervention until police investigations were completed.
BSkyB’s shares were worth just 600p before Murdoch launched his bid to take full control of the company in June 2010, and City traders believe the share price will remain above £8 unless the takeover is blocked.
A lengthy delay, though, will hit asset management firms and hedge funds who have bought shares in BSkyB over the past year in the expectation of guaranteed profits this summer.
Richard Greenfield, an analyst at US broker BTIG, said Wall Street was betting News Corporation’s acquisition of BSkyB would happen and that if the News of the World scandal prompted Murdoch to review his investment in the newspaper industry, “all well and good”.
He said Murdoch’s other media interests in cable television – Fox News and his numerous other operations – were far more valuable in the eyes of investors than his newspapers.
The UK government has refused to suspend consideration of News Corp’s takeover bid for BSkyB. However, with more than 140,000 submissions delivered to British culture secretary Jeremy Hunt, it appears the decision will not be taken until later this year. – (Guardian service)