Tuesday, July 12, 2011

Murdoch faces UK political backlash

Andrew Edgecliffe-Johnson, Ben Fenton, George Parker and Salamander Davoudi
Assistant Commissioner John Yates gives evidence

The British political establishment rose up against Rupert Murdoch on Tuesday, seeking to kill his attempt to buy full control of British Sky Broadcasting, just as the News Corp chairman moved to appease investors with a $5bn share buyback plan.

David Cameron and Nick Clegg decided to back a Labour motion in the Commons on Wednesday demanding that Mr Murdoch withdraw his largest ever takeover bid, as all political support for the once mighty media tycoon evaporated.

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Although the Commons vote is not legally binding, shares in News Corp fell sharply on the news and an aide to Ed Miliband, Labour leader, said: “It would seem to us inconceivable that he can ignore the will of the House of Commons, reflecting the will of the British people.

“There are times when the House of Commons has got to rise to the occasion and speak for the public. We have said that the purchase of BSkyB should not proceed until after criminal inquiries are complete.”

One person who has previously worked closely with Mr Murdoch on strategy and acquisition said “I think he must be thinking of pulling the bid, if not tonight, then after the debate tomorrow.”

One of the few senior politicians to stay neutral in the Commons debate will be Jeremy Hunt, the culture secretary, who has a quasi-judicial role in the bid process. Downing Street insisted that role would not be undermined by the parliamentary vote.

Meanwhile Mr Murdoch, his son James and Rebekah Brooks, chief executive of News International, were invited to appear before a parliamentary committee next week, although the company declined to say which of the executives would appear.

As the political developments threatened to overwhelm Mr Murdoch at his Wapping compound, he made another dramatic bid to regain the initiative, announcing that News Corp would add $3.2bn to a pre-existing $1.8bn stock repurchase programme, beginning in August.

The buyback plan briefly reversed a week-long slide in News Corp’s shares. But after it emerged that the entire House of Commons would signal its opposition to the BSkyB bid, the company’s shares were up just 2 cents in mid-day trading.

The developments came amid growing speculation that News Corp could seek to exit its scandal-struck UK newspaper group.

And Mr Cameron will on Wednesday name the judge who will oversee the phone hacking inquiries. On Tuesday night he held private talks with Sir Paul Stephenson, Metropolitan Police commissioner, to discuss Scotland Yard’s handling of the scandal.

Senior police officers were on Tuesday grilled by MPs on their failure to investigate fully the original allegations of phone hacking. Sue Akers, leading the new investigation, said even the new management of NI had not been helping as much as she hoped.

Ms Akers said that so far, only 173 of almost 4,000 potential targets of the News of the World’s phone hacking had been contacted by police. That disclosure opens the prospect of a dramatic increase in the number of victims who could seek compensation from News International.

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