Britain clears News Corp's Sky deal

By Kate Holton and Georgina Prodhan

LONDON (Reuters) - News Corp <NWSA.O> secured British government backing for its buyout of BSkyB <BSY.L> on Thursday after the minister responsible rejected complaints the move would give Rupert Murdoch too much power and influence.

The Department of Media gave its blessing to the multi-billion-dollar deal after News Corp agreed to spin off BSkyB's influential Sky News channel to ease competition concerns amongst the industry and politicians.

The Conservative-led coalition government, often charged with being too close to Murdoch, announced a final short consultation period to consider further undertakings designed to guarantee the editorial independence of Sky News.

"I am aware of the huge interest in the proposed merger," minister Jeremy Hunt said.

"I could have decided to accept the original undertakings but a number of suggestions were made ... particularly around editorial independence, business viability and the articles of association."

The new proposals set strict guidelines around who can become an independent director at the new Sky News company -- anyone who has worked for News Corp within the past five years cannot take the role.

Independent directors will also have to be present at board meetings if decisions on editorial issues are taken. A monitoring trustee will be appointed to ensure News Corp complies with the undertakings in the run up to the spin of.

"These proposals makes the original deal more secure," media consultant Steve Hewlett told Reuters. "What it won't do is fundamentally alter the views of people who, for their own commercial or other reasons, are passionately opposed to it.

"But are they in a position to stop it? I doubt it."


News Corp said it would work with the government to complete the final stage of the regulatory process.

News Corp and BSkyB can now get ready to start negotiating terms for what will be the U.S. media conglomerate's biggest acquisition. Some large BSkyB shareholders have begun to publicize the price they believe News Corp should pay.

A year ago, News Corp said it had offered 700 pence per share for the 61 percent of BSkyB it did not already own, or 7.8 billion pounds ($12.5 billion). BSkyB's independent directors demanded at least 800 pence.

BSkyB shares were up 0.1 percent to 849 pence in early trading.

The takeover battle sparked a debate in Britain about the dominance of Murdoch-owned media and many have not been reassured by the ruling which will see News Corp spin off Sky News but remain the main funder and 40 percent owner.

Rival media groups, still recovering from global recession which hammered advertising -- their key revenue source -- have complained, as they fear News Corp's financial clout.

Marc Israel, competition partner at law firm Macfarlanes, said Hunt had been perfectly within his right not to refer the matter to the Competition Commission for a lengthy review.

"Ironically, for those opposed to the deal, this outcome may be better than a review by the Competition Commission which could have cleared it unconditionally after an in-depth review," he said. ($1 = 0.626 pound)

(Editing by Dan Lalor)