Rupert Murdoch's News Corp took a huge step toward securing its prized $14 billion buyout of BSkyB when Britain accepted its proposals to alleviate competition concerns.
The move, which could still be challenged by media rivals in court, would 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.
As BSkyB consistently posts strong results, analysts have said the price for the satellite pay-TV group will only increase and News Corp was under pressure to secure a deal as soon as possible.
However, the government's decision Thursday is likely to draw heavy criticism and raise questions about its relationship with Murdoch's powerful media empire.
In return for clearance on the deal, News Corp will spin off the loss-making but influential Sky News channel and guarantee its future by giving it a 10-year carriage deal on the Sky TV platform and a seven-year branding agreement to use the Sky name.
The shares in that company would be distributed amongst the existing shareholders of BSkyB in line with their shareholdings, with News Corp therefore retaining a 39.1 percent stake.
To ensure editorial independence, the company would have a board made up of a majority of independent directors, including an independent chair.
News Corp is seeking to buy the 61 percent of BSkyB it does not already own, aiming to consolidate a business it helped build but raising concerns that Murdoch would gain too much control over the media and influence over public opinion.
News Corp owns about a third of the newspaper market in Britain, including The Times and the country's best-selling tabloid The Sun, which both supported Cameron's Conservatives in last May's general election.
The prospect that the company could increase its influence further has been met by fierce criticism from rivals, analysts and some parliamentarians.
An alliance of media groups opposed to the deal criticized News Corp's solution to competition concerns.
We shall be vigorously contesting this whitewash of a proposal during the consultation period, as well examining all legal options, the media alliance said Thursday.
The deal has also come at a difficult time for News Corp as some of its tabloid journalists also face accusations that they accessed the mobile phone accounts of celebrities and politicians to break exclusive news.
News Corp had offered 700 pence per share for BSkyB but Sky's independent directors have demanded 800 pence as a minimum. The two companies agreed to secure regulatory approval first and then agree terms.
Shares in the satellite pay-TV group, one of the most successful in Europe, have risen in recent days as investors expected a positive outcome from the government.
They were up 2 percent at 815 pence Thursday, valuing the firm at $23.3 billion and the stake at $14.2 billion.
Throughout this process I have been very aware of the potential controversy surrounding this merger, Secretary of State Jeremy Hunt said in a statement.
Informed by advice from the regulators, I believe that these (undertakings) will address concerns about media plurality.
The government will now hold a consultation until March 21.
(Reporting by Kate Holton; Editing by Erica Billingham)