Rupert Murdoch's £8bn bid for BSkyB hung in the balance on Tuesday night in the wake of David Cameron's decision to call on the 80-year-old media mogul to drop the takeover offer that would make his company the largest media group in the UK.
Cameron's decision to side with Ed Miliband and Nick Clegg against the bid leaves Murdoch weighing up whether he wants to plough on in defiance of a vote that is almost certain to be passed by MPs just a day after he was forced to abandon his attempt to get the bid agreed without a referral to the Competition Commission.
Formally, Murdoch's News Corp was tight-lipped on whether the bid would survive a negative vote, but the company's willingness to drop its plan to spin off Sky News in lieu of a referral to the commission shows its leader is thinking pragmatically in response to the intense public and political pressure.
Technically Murdoch could defy any Commons resolution, because it is not legally binding. If it is passed, and Murdoch tried to carry on, media law specialists advise that parliament could try to pass legislation aimed at blocking the bid immediately – a bill that could be passed very quickly if the will was there.
News Corp may still be hoping that by playing for time – a commission review would take a minimum of 24 weeks and possibly eight more – there could come a time when the bid could proceed. However, the company has to contend with the fact that criminal, judicial, criminal and parliamentary inquiries into hacking are likely to continue well into next year. Against such a backdrop there may not be an easy political consensus to allow News Corp to buy BSkyB.
Rupert Murdoch may also choose simply to move on. The company has said many times that it does not have to invest in BSkyB. Its 39% stake has long given it an effective controlling position, and James Murdoch remains chairman of the satellite broadcaster.
Company capital that would have gone into Sky can easily go elsewhere, and News Corp underlined that yesterday by announcing plans to spend $5bn of its own money buying back its own stock, supporting its own share price at a time when investor confidence has been knocked. News Corp liquid non-voting shares have fallen by 12% in the past five days.
Speculation grew that Murdoch could even consider selling the rest of his British newspapers, the Times and the Sun, although the talk looks somewhat unlikely given that News International appeared to insiders to be feverishly preparing to launch the Sun on Sunday, most probably under the editorship of Victoria Newton, as soon as this week.
However, the most likely person to send him an unsolicited bid, Richard Desmond, let it be known he was keeping "a low profile" on the subject. Desmond offered to pay £1bn to buy the Sun in 2009 – an offer that was instantly rejected by Murdoch.
In the current climate any offer for the Sun from Desmond or anybody else would almost certainly be lower, with one influential media banker noting: "Why would you sell with your back against the wall? That's the way to get a bad price."
Some analysts argue that it would be logical for Murdoch to consider "the newspaper sale of the century" in which the Times, Sunday Times and Sun would be put on the auction block.
Theoretically, a sale could help win regulatory clearance for any Sky bid because it would ease worries about media domination. But City sources said it would not rid Murdoch of the questions that hang over the period in which he owned the News of the World.
Nevertheless, a sale of News International could also please those who believe the company should reduce its exposure to newspapers.
Paul Gooden, media analyst at the Royal Bank of Scotland, said: "There is certainly an economic argument for saying it would be worth disposing of the UK newspapers if the prize was control of BSkyB. News International generates around £80m of annual operating profit. But in 2010-11 BSkyB is forecast to make operating profit of more than £1bn."
Andreas Whittam Smith, a former editor of the Independent, was among those suggesting a sale of the Murdoch's UK papers was a real possibility. Now a commissioner for the Church of England, he told the CoE's national assembly meeting in York it may be better for the church to hold on to its £9m investment in NewsCorp and BSkyB in the hope the shares in the two companies will rise if the papers are sold off.
"I think it must be possible that News Corp will get rid of its entire British holdings, of newspapers that is, and that if it is to do so, first of all the problem would have vanished if you like from the point of view of the parent company and for us as investors, and the shares will certainly bounce up again, and so it is a ticklish area."
