James Murdoch BSkyB role clouded

LONDON/NEW YORK Mon Jul 18, 2011 5:55pm EDT

1 of 3. The Times, Sun, Guardian, Financial Times, Independent, Daily Mail, and Daily Telegraph newspapers are displayed featuring an apology from News Corp chairman and chief executive officer Rupert Murdoch, in London, July 16, 2011.

Credit: Reuters/Suzanne Plunkett

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LONDON/NEW YORK (Reuters) - James Murdoch's future as chairman of British Sky Broadcasting (BSY.L) was thrown into doubt on Monday after minority investors called for a corporate governance health check of its board.

It is the latest action to weaken James' position, and it increased the likelihood that his executive role at News Corp (NWSA.O) could be in jeopardy.

This could open the door for Chief Operating Officer Chase Carey to be the next chief executive of News Corp instead of James as many investors had been expecting.

"We think they should review the composition of the BSkyB board and the influence exerted by those with ties to News Corp," one top 10 investor in the British satellite broadcaster told Reuters on condition of anonymity.

A second top 25 investor in the company said BSkyB's corporate governance remained "tricky" but he denied market chatter that fellow shareholders were determined to drive out Murdoch.

Carey, a 23-year News Corp veteran and long-time lieutenant of Rupert Murdoch, is now favored by investors in the United States to take control of the business if Rupert Murdoch, 80, stands down [ID:nN1E76C17K]. Until a phone hacking scandal at News Corp's UK papers started escalating over the past three weeks, James Murdoch, who is deputy chief operating officer, had been seen as his father's successor.

A series of missteps by James, 38, in handling the scandal are believed to have hurt his chances of taking over.

"We're looking for the silver lining in all this, and it could be this crisis forces News Corp to clarify its succession plan," said Tuna Amobi, an analyst at Standard & Poor's.

"Most investors I speak to would love for Chase to be given an even more prominent role," said Amobi.

News Corp's U.S. shares closed down 4.3 percent at $14.96 on Monday on Nasdaq.

The company's market capitalization has lost more than $6 billion in value since the phone hacking scandal erupted on July 4 in the UK.

Ratings agency Standard & Poor's said on Monday that it may cut News Corp's ratings, citing what it called increased business and reputation risks associated with broadening legal inquiries in the UK. It also noted that the Federal Bureau of Investigation in the United Sates was looking into some allegations pertaining to the phone-hacking scandal.

The Australian stock sank to a two-year low after Rebekah Brooks, ex-chief executive of the company's UK arm, News International, was arrested on Sunday and the head of London's Metropolitan Police, Paul Stephenson, quit over the scandal. [ID:nL6E7II006] The shares ended down 4.1 percent at A$14.16 after touching a low of A$13.65.

"I think people would rather be cautious and mark it down rather than find a reason to defend it," said Invesco senior investment manager Jackson Leung in Melbourne. Invesco is News Corp's second-largest institutional shareholder with a 1.7 percent stake, according to Thomson Reuters data.

Shares in a News Corp takeover target, pay-tv company Austar AUN.AX, also fell on worries the deal may not proceed. The furor in Britain forced News Corp to drop a $12 billion plan to buy all of highly profitable UK pay-TV broadcaster BSkyB (BSY.L). BSkyB's credit default swaps spreads widened as the deal with News Corp fell apart. The company's 5-year CDS spread widened by 18 basis points to 93 basis points.

Austar has agreed a $2 billion-plus takeover offer from its bigger rival Foxtel, which is owned by News Corp's News Ltd division, billionaire James Packer's Consolidated Media Holdings CMJ.AX, and telecom company Telstra (TLS.AX).

Murdoch's News Ltd dominates the Australian newspaper industry, commanding nearly three-quarters of daily metropolitan newspaper circulation, and the UK scandal has riveted attention in his homeland.

Murdoch, who now has U.S. citizenship, started his global media empire in Adelaide when he inherited the now defunct Adelaide News from his father, Sir Keith Murdoch.

Austar closed down 3.8 percent while Consolidated Media fell 2.9 percent, against a flat broader market, reflecting investor concerns on the future of the deal.

Still, the Austar and Foxtel camps and banking sources familiar with the deal said the offer was on track and did not expect it to be derailed because Foxtel is only 25 percent owned by News Corp.

Australia's competition watchdog is due to rule on the bid for Austar on July 21.

Reuters is a competitor of Dow Jones Newswires, the financial news agency that News Corp acquired along with the Wall Street Journal in 2007.

(Reporting by Victoria Thieberger in Melbourne, Sinead Cruise in London, Yinka Adegoke in New York; Additional reporting by Michael Erman in New York and Sonali Paul in Melbourne; Editing by David Cowell)

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Comments (11)
piwood wrote:
I look forward to having the inquiry cross the pond. Expect much more death spiral when it is found out that News Corp hacked phones of victims of 911. When they paid off the top cop in NYC just like they did in London. When a few Senators’ phones turn up being hacked and the tracks lead back to FOX News.

Jul 17, 2011 11:43pm EDT  --  Report as abuse
scottabc wrote:
There needs to be political pressure to make sure the U.S. investigation is effective and covers all the areas it needs to. It is underreported in my opinion the extent that News Corp tried to influence and control the British government. I have little doubt that, with the help of right-wing allies they have been attempting to do the same in the U.S. British police officials have already resigned because of ties to News Corp. I doubt News Corp has equivalent ties with U.S. police and FBI but I do believe they have ties with powerful right wing politicians who can effect how investigations are carried out.

Jul 17, 2011 12:29am EDT  --  Report as abuse
dXm wrote:
Sadly, I’m not sure there will be much of a “death spiral” from the inquiry here in the US.
Murdoch & his media wield a great deal of power over our political system. Enough so that he has split the populace into two groups, one of which is just itching for excuses to kill the other one.
Murdoch well may have the juice to escape any blame for this. So far his underlings & lieutenants are taking the fall, and Murdoch is predictably playing dumb.
Democracy is dead here. A Plutocracy has taken it’s place. A feeling of quiet desperation has fallen across the country.

Jul 18, 2011 1:04am EDT  --  Report as abuse
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