Rupert Murdoch's News Corp took a huge step toward securing its prized $14 billion buyout of satellite broadcaster BSkyB when Britain accepted its proposals to ease competition concerns.
The move will allow News Corp to avoid a prolonged investigation and start negotiating the terms of the deal, its most important and politically charged in Britain for decades.
With BSkyB consistently adding new customers and selling more services, analysts had said the acquisition price would rise and Murdoch's proposal to spin off a chunk of his flagship Sky News channel shows his desire to do a quick deal.
Murdoch has shown how much he wants to acquire the asset, and how speedily he wants to do so, said Tim Daniels, media sector strategist at Olivetree Securities. It seems he doesn't have much leverage to avoid paying shareholders top-dollar.
News Corp made its initial offer of 700 pence ($1,139) per share for the pay-TV group last summer. Sky's independent directors said they wanted over 800 pence and analysts said on Thursday that the asking price should now be over 900 pence.
The evidence that News Corp is in a hurry suggests that it may be willing to pay 900 pence to 1,000 pence to secure a deal quickly, Citi media analyst Thomas Singlehurst said.
The stock was trading at 821 pence at 1420 GMT (9:20 a.m. EST) as investors eyed a deal, although major shareholder Odey Asset Management told Reuters it was still reluctant to sell at any price.
It's all about how many other shareholders are going to be happy at a price at 900 pence or whatever price it is, Chief Executive David Stewart said. And if they aren't happy at that price, and the deal doesn't go through, then we won't be upset.
The takeover battle has sparked a huge debate in Britain about the dominance of Murdoch-owned media and many were not reassured by the ruling which will see him remain as the main funder and 40 percent owner of the influential Sky News channel.
Analysts and lawyers including one with direct knowledge of the situation said it would be hard to challenge the ruling although it will raise questions over the government's conduct as Murdoch's papers backed the party at the last election.
Murdoch, which also owns a third of the British newspaper market including The Sun and Times papers, has a reputation for interfering in the editorial stance of his companies and analysts have speculated that he waited until a Conservative government was in power before launching the offer.
We're worried that there could be a more vitriolic media atmosphere developing over here and we find that politicians too often dance to Murdoch's tune rather than stand up for the public interest, protest organizer Alex Wilks told Reuters.
An alliance of media groups opposed to the buyout dismissed Murdoch's solution to competition concerns as a whitewash while the opposition Labor party said it had concerns around the transparency of the process.
It has been well-documented by former Murdoch editors that arrangements of this kind, including those put in place to protect the independence of the Sunday Times and Times, have proved wholly ineffective, the alliance said.
In return for clearance, News Corp will spin off the loss-making Sky News channel and guarantee its future by giving it a 10-year carriage deal on the Sky TV platform and a seven-year agreement to use the Sky name.
Its board will have a majority of independent directors and the shares in the new company will be distributed amongst the existing shareholders of BSkyB in line with their holdings, with News Corp therefore retaining a 39.1 percent stake.
BSkyB has provided few details about Sky News but analysts speculate that it loses more than 20 million pounds a year and that the carriage deal from BSkyB would need to at least cover that loss to make it an attractive prospect.
Analysts say a new Sky News company would be worth around 6 to 15 pence per share to the deal.
Competition lawyers said Media Secretary Jeremy Hunt had played a very clever hand which would suit News Corp and be tough to challenge as the Sky News ownership remained unchanged.
The ten-year funding provision combined with a seven-year branding license is a canny way to prevent News Corp from shutting down Sky News, whilst potentially making it a more attractive target to an interested third party, said Stephen Smith, a partner at city law firm Reynolds Porter Chamberlain.
The government will now hold a consultation until March 21.
(Additional reporting by Isabel Coles and Sinead Cruise; Editing by Erica Billingham and David Cowell)