James Murdoch, the chairman and chief executive of News International, will have to pay a £38.5m break-fee to BSkyB if the giant media group fails to go ahead with plans to bid for the broadcaster in which it owns a majority stake.
The fee was part of the terms agreed when Mr Murdoch, who is also chairman of BSkyB, launched its controversial 700p-a- share bid last year for the shares it doesn't already own. The fee, equivalent to 0.5 per cent of the then value of the bid, covers regulatory and other costs.
Nearly £2bn has been wiped off the value of BSkyB since the fresh allegations of phone-hacking. Shares fell another 7 per cent to 750p on Friday.
Mr Murdoch has moved swiftly to limit the damage to News Int following new accusations that staff at the News of the World – which is to publish its last edition today – paid private investigators to hack into the mobile phones of another 4,000 people, including murder victim Milly Dowler and the families of soldiers killed in Iraq.
The allegations prompted Jeremy Hunt, the Culture Secretary, to postpone his final decision on whether News Corporation should be allowed to bid until the autumn after more than 100,000 complaints were received in the past few days.
He had approved the bid earlier this year – providing Sky News was split off to ensure media plurality – but was awaiting final submissions before an official go ahead was given – originally planned for last week.
To add to his problems on Friday, the media regulator Ofcom said it is closely following the investigations into this week's scandal and will decree whether News Corp would be a "fit and proper" owner of BSkyB.
Ofcom said it has written to the authorities asking to be kept informed of any information following allegations of illegal practices. A statement said: "We are closely monitoring the situation and in particular the investigations by the relevant authorities into the alleged unlawful activities."
One banker advising News Corp said: "Of course News Corp still wants the deal. But this is obviously going to take a lot longer. We have been on hold awaiting regulatory approval and we are still waiting for that."
If News Corp were able to pursue its plans for the bid, a sticking point is still its bid price. News Corp's 700p- a-share bid was already deemed too low by BSkyB's board. But as one media banker said: "BSkyB's pre-tax profit has risen this year which means its independent directors could push for closer to 1,000p a share.
"News Corp's original bid was on 11.8 times Ebitda. If you take this figure for predicted 2011 earnings, a bid price to satisfy BSkyB could be upward of 900p a share." The earlier bid valued BSkyB at £12bn.
Mr Hunt's final regulatory decision is now set for September and Ofcom is awaiting the outcome of police investigations.Reuse content