- - Wednesday, July 13, 2011

LONDON Rupert Murdoch withdrew his bid to take full control over Britain’s biggest satellite broadcaster Wednesday after coming under increasing pressure from the British government over a phone-hacking scandal involving his tabloid newspaper News of the World.

“The proposed acquisition of BSkyB by News Corp. would benefit both companies, but it has become clear that it is too difficult to progress in this climate,” said News Corp. Deputy Chairman Chase Carey.

Mr. Carey announced that the company dropped its offer to buy 61 percent of the shares of British Sky Broadcasting, known as BSkyB, in what would have been the company’s biggest acquisition to date.

“News Corp. will remain a long-term shareholder in BSkyB. We are proud of the success it has achieved and our contribution to it,” he said.

News Corp. continues to hold a 39 percent share of Britain’s most profitable broadcaster.

“What happened today is that Rupert Murdoch understood the deal was impossible,” said Claire Enders, founder of Enders Analysis, a media business consultancy in London.

Mr. Murdoch and News Corp. have come under fire over charges that reporters for the New of the World hacked into the phones of a teenage murder victim, relatives of soldiers killed in action in Afghanistan and victims of terrorist bombing attacks in London.

Since the scandal broke last week, it had been widely speculated that the deal over the BSkyB share purchase would be in jeopardy. The withdrawal of the bid is seen as one more attempt by News Corp. to contain the spiraling scandal.

Mr. Murdoch also shut down the News of the World, Britain’s largest-selling newspaper, which published its last edition on Sunday after 168 years.

News Corp. had been trying for months to get the government’s approval to take control of BSkyB for $12 billion. Mr. Murdoch also owns the Times of London, the Sunday Times and the Sun, as well as the Fox media empire, the New York Post and the Wall Street Journal in the United States.

Mr. Murdoch withdrew his bid for BSkyB a few hours before the British House of Commons was due to vote on a measure to disapprove of the transaction.

“There needs to be root-and-branch change at this entire organization,” Prime Minister David Cameron told the House of Commons Wednesday, referring to News Corp.

“What has happened at this company is disgraceful, and it has to be addressed at every level. They should stop thinking about mergers when they have to sort out this mess.”

Mr. Cameron also announced the appointment of Lord Justice Brian Leveson to lead public inquiries into the hacking allegations and charges that journalists paid off police for illegal information. He also will examine the cozy relationship that has developed among some reporters, police officers and politicians.

Mr. Murdoch’s son James, who exercises control over News Corp.’s U.K. operations, and Rebekah Brooks, another top Murdoch corporate executive, are expected to be called to testify in front of a parliamentary committee next week.

Police already have arrested eight people in connection with the hacking scandal, including Andy Coulson, Mr. Cameron’s former communications director and former editor at the News of the World.

“There is a firestorm that is engulfing parts of the media, parts of the police and indeed our political system’s ability to respond,” Mr. Cameron said.

Jason Walsh reported in Dublin, Naomi Westland reported in London, and Jabeen Bhatti contributed to this report from Berlin.

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