News Corp. And BSkyB: Conspiracy Theories And Other Very Bad Things

News of the World on iPad

Here’s an excerpt from BTIG analyst Rich Greenfield’s take on the potential impact of the News of the World hacking scandal on News Corp (NSDQ: NWS). and Rupert Murdoch’s BSkyB (NYSE: BSY) dreams. Click through (the full post requires registration) to see why Greenfield thinks the timing of the revelations somehow was meant to derail the deal. He also has a detailed timeline.

It honestly feels like there were opponents of the News Corp/BSkyB transaction that realized there was simply no way to block the deal on “Media Plurality” grounds, so in turn, they unearthed a wide array of illicit activity at News International to throw a “wrench” into the acquisition process. What we find even stranger is how the government approval process dragged on “just” long enough for this week’s explosive news to come out, rather than the deal having been first approved and then have the news explode…

We continue to believe News Corp. will ultimately end up acquiring 100% of BSkyB, however, we could envision the transaction taking another year or more to occur.

— While it is factually correct that News Corp. / BSkyB could proceed if the government formally approves its revised undertakings in Fall 2011, we are concerned that the situation has gotten so sensational (public outrage), that the deal may need to wait for government investigations to conclude before moving forward.

— Worth noting that News Corp.’s News America Incorporated division owns its 39% stake in BSkyB (and would own the 100% BSkyB stake if the acquisition is approved), with News International, a separate News Corp. subsidiary that owns the UK newspapers involved in the current scandal. The only common executive/director of News Corp. and News International is James Murdoch. In turn, it is hard to see how “Fit and Proper” broadcast license issues would arise at BSkyB for transgressions at News International unless Rupert Murdoch were directly involved (we presume James Murdoch could leave the News Corp. board if necessary). Also bear in mind that the “Fit and Proper” clause only relates to BSkyB’s cable television networks and not to its satellite delivered multichannel video subscriber business.

— We believe it is prudent to assume a “long” approval process at this point given our fear of what we do not know and what may or may not come out next, including what Andy Coulson knows and how far up the News Corp. executive ladder current revelations will lead.

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