LONDON — In a stunning retreat, Rupert Murdoch’s News Corp. dropped its bid Wednesday to take full control of British Sky Broadcasting during what the prime minister called a political and media “firestorm” over phone hacking at one of the media baron’s U.K. newspapers.
Murdoch stepped back from making potentially his biggest, most lucrative acquisition, accepting that he could not win British government approval of the takeover since the country’s major political parties had united against it.
“It has become clear that it is too difficult to progress in this climate,” News Corp. deputy chairman and president Chase Carey said in a brief statement to the London Stock Exchange.
Shares in BSkyB dived four per cent lower after the announcement, but rebounded as uncertainty about the company’s immediate future was lifted, closing two per cent higher.
Hours earlier, Prime Minister David Cameron announced he was putting a senior judge in charge of an inquiry into phone hacking and alleged police bribery by one of Murdoch’s British tabloids, News of the World. The British leader also vowed to investigate an allegation that a U.K. reporter may have sought the phone numbers of 9/11 terror victims in a quest for sensational scoops.
“There is a firestorm, if you like, that is engulfing parts of the media, parts of the police, and indeed our political system’s ability to respond,” Cameron said in the House of Commons. He said the focus must now be on the victims — police say they will be contacting over 3,700 people in the probe — and making sure the guilty are prosecuted.
It is a bitter irony for Murdoch that News of the World, his first British acquisition in 1969, sabotaged his ambitions to control the nation’s most profitable broadcaster.
The media baron had shut down the 168-year-old muckraking tabloid Sunday and flew to London in a desperate scramble to keep the BSkyB bid alive. Murdoch had hoped to gain control of the 61 per cent of BSkyB shares that his News Corp. doesn’t already own.
“People thought it was beyond belief that Mr. Murdoch could continue with his takeover after these revelations,” said Labour leader Ed Miliband.
Outrage has grown and Murdoch’s News Corp.’s share price has fallen since a report last week that News of the World had hacked into the phone of teenage murder victim Milly Dowler in 2002 and may have impeded a police investigation into her disappearance.
That was followed by claims of intrusion into private records by Murdoch’s other U.K. papers, The Sun and The Sunday Times.
Police have arrested eight people so far in their investigation, including Cameron’s former communications director Andy Coulson, a former editor of News of the World. No one has been charged.
Lawmakers held an hours-long debate on the scandal Wednesday that had been due to end with a vote on a motion declaring that Murdoch’s bid for full control of BSkyB would not be in the national interest. All three main parties had vowed to back the nonbinding motion.