January 25, 2011 / 7:32 AM / 9 years ago

RPT-UPDATE 3-UK gives Murdoch last chance to avoid BSkyB probe

(Repeats to additional Reuters services)

* Govt says minded to refer deal to Competition Commission

* Says will consider News Corp proposals first

(Adds details, reaction)

By Kate Holton

LONDON, Jan 25 (Reuters) - Britain will give News Corp (NWSA.O) a final chance to avoid a prolonged investigation into its $12.5 billion buyout of BSkyB BSY.L, a move likely to draw flak for the government’s relations with Rupert Murdoch.

Culture Secretary Jeremy Hunt said on Tuesday he would consider unspecified proposals put forward by News Corp to alleviate competition concerns before deciding whether to refer the proposed deal for a full, six-month competition inquiry.

Murdoch is seeking to buy the 61 percent of BSkyB BSY.L it does not already own, aiming to consolidate a business it helped build but raising concerns it would give the company led by Rupert Murdoch too much control over media and public opinion.

The move also comes at a time when Murdoch’s empire is under fire in Britain for the conduct of its journalists in a phone-hacking scandal that has thrown a light on the power and integrity of his company.

“If you take the politics out of it then this (Hunt’s concession) is a sensible approach,” media consultant Steve Hewlett told Reuters. “But he will get substantial political flak for this. It would have been far easier for Jeremy Hunt just to refer it.”

News Corp said it strongly disagreed with the conclusion drawn by media regulator Ofcom that a referral was needed, but said for the sake of expediency it would work with the government to find a solution. It did not say what its proposals were.

Some lawyers have speculated that News Corp could offer to spin off its news channel Sky News, however several media bankers have told Reuters they do not know of any obvious buyer for the channel, making that option more complicated.

Several competition lawyers spoken to by Reuters have said the deal should be referred for a further probe because it is too complicated for a quick settlement.

“On the evidence available, I consider that it may be the case that the merger may operate against the public interest in media plurality,” Hunt said in a statement. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For a Breakingviews comment please double click on [ID:nLDE70O0H5] For a related factbox click on [ID:nLDE6BS0U4] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

MARKET POWER

News Corp owns about a third of the newspaper market in Britain, including The Times and the country’s best-selling tabloid The Sun, which both supported Prime Minister David Cameron during last May’s national parliamentary elections.

If the BSkyB deal is referred to the Competition Commission, it would look at the merger on the grounds of media plurality and whether it would reduce the number of “voices” in the sector.

The decision comes at a difficult time for Murdoch, after a row erupted over allegations his journalists hacked the phones of politicians and celebrities to secure sensational stories.

The row has already cost the job of Andy Coulson, the communications chief to Prime Minister David Cameron, who was editor of the top-selling News of the World Sunday tabloid at the time. [ID:nLDE70K13K]

Lawyers have said the hacking scandal would not affect the legal case for a takeover, but it does heap pressure on Hunt, a rising star in the Conservative Party, as he makes his decision.

The takeover saga has also damaged the career of the Business Secretary Vince Cable, a popular member of the smaller Liberal Democrat party in the governing coalition, who was secretly taped saying he had “declared war” on Murdoch.

News Corp has offered to pay 700 pence per share for BSkyB, which dominates Britain’s pay-TV market with 10 million customers due mainly to its sports and movie offerings.

The independent directors of BSkyB have said they would be prepared to support an offer of above 800 pence.

Simon Holmes, a competition lawyer at SJ Berwin, told Reuters the deal should be sent for referral

“Why wouldn’t you refer it to the Competition Commission if that is what Ofcom has suggested?,” Holmes said, before the statement was released.

“There may be some construct that can be put in place, but I’m not sure it should be done on the hoof and without a reference, it should be looked at in detail.” (Editing by Rhys Jones and David Holmes) ($1 = 0.6252 pound)

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