News Corp. Drops BSkyB Bid as Phone Hacking Scandal Consumes Company

Statement: “It has become clear that it is too difficult to progress in this climate”

Last Updated: July 13, 2011 @ 4:16 PM

Rupert Murdoch's News Corp. has dropped its bid for control of BSkyB because of the phone hacking scandal that has consumed the company.

"It has become clear that it is too difficult to progress in this climate," Chase Carey, News Corp.’s Chief Operating Officer, said in an e-mailed statement. "News Corp. remains a committed long-term shareholder in BSkyB."

Also read: Cameron Backs Call for News Corp. to Abandon BSkyB Bid

Struggling News Corp. shares went up on the news, closing up 1.74 percent at $16.36.

The announcement came just hours before Prime Minister David Cameron was expected to join Parliament to vote for a measure calling on News Corp. to drop its $12 billion bid for control of the satellite broadcasting company. Cameron had appeared earlier in the day before the House of Commons, and was to meet with the family of 13-year-old murder victim Milly Dowler, whose phone was hacked by News Corp.'s News of the World.

On Sunday, Murdoch shuttered the paper in what was widely seen as a bid to sacrifice it for the sake of saving the BSkyB deal.

Now he has neither. But he could pursue BSkyB again.

The motion Parliament had planned to vote on would not have been binding, but continued the pressure on Murdoch, who was asked Tuesday to appear before Parliament, along with his son James and News International chief executive Rebekah Brooks, to answer questions about the scandal.

Cameron, eager to distance himself from the scandal after hiring former News of the World editor Andy Coulson as a top aide, has called for two investigations of the scandal.

Scuttling the BSkyB deal by no means ends the pressure on News Corp. On Tuesday, Sen. Jay Rockefeller called for a U.S. investigation to see if any Americans phones were hacked.

The Democratic chair of the Senate Commerce, Science and Transportation Committee said in a statement that "reported hacking by News Corporation newspapers against a range of individuals—including children—is offensive and a serious breach of journalistic ethics." He promised "the consequences will be severe" if the phone hacking extended to the U.S.

News Corp.'s U.S. holdings include Twentieth Century Fox, Fox News Channel, the Fox broadcast network, and The Wall Street Journal.

The company announced a $5 billion stock buyback plan Tuesday to try to reward investors for sticking with it through a dive in share price caused by the scandal.