The British culture secretary Jeremy Hunt has approved News Corporation's controversial proposal to take full control of the subscription television giant BSkyB, all but ensuring that the deal will go ahead.
In an announcement this afternoon, Hunt confirmed that News Corp had offered a series of undertakings in order to assuage concerns about the planned takeover's effect on media plurality. The proposal, first announced last year, would result in News Corp buying the remaining 60.9 per cent of Sky that it does not already own.
The undertakings would lead to Sky jettisoning its 24-hour news channel Sky News, which would be split off and reconstituted as an independent public limited company.
The offer to carve off the channel was derided by opponents of the deal as "smoke and mirrors".
Shares in the new entity would be distributed to existing Sky shareholders, meaning that News Corp would retain a 39.1 per cent stake. The new company's chairman and a majority of directors would be required to be independent, and News Corp would have to obtain permission from the culture secretary before any attempt to increase its holding for the next ten years.
The undertakings will now be subject to a fifteen-day consultation period, after which Hunt's "intention to accept" will become an official green light. Hunt said that he had come to his decision after consulting with the media regulator Ofcom and the Office of Fair Trading.
"Informed by advice from the regulators, I believe that these will address concerns about media plurality should the proposed News Corporation/BSkyB merger go ahead," he said.
"The undertakings offered would ensure that shareholdings in Sky News would remain unchanged, and indeed offer it more independence from News Corporation than it currently has."
But an alliance of rival media organisations - including Guardian Media Group, Telegraph Media Group, Associated Newspapers, Trinity Mirror, BT and Northcliffe Media - issued an angry statement condemning what it described as a "whitewash". The alliance said that spinning off Sky News was "pure window-dressing", and indicated that it would consider seeking a judicial review.
"Smoke and mirrors will not protect media plurality in the UK from the overweening influence of News Corporation," a spokesperson for the organisations said.
"In addition, the undertaking does nothing to address the profound concerns that the takeover would give News Corporation greater power to restrict or distort competition through cross-promotion, bundling, banning rivals' advertisements and distorting the advertising market with cross-platform deals.
"We shall be vigorously contesting this whitewash of a proposal during the consultation period, as well examining all legal options."
The culture secretary's intention to give his stamp of approval means that the proposed deal will not be referred to the Competition Commission. In January, Hunt delayed a decision on whether to refer the takeover proposal to the watchdog, claiming that more time was needed for News Corp to offer commitments that would address plurality concerns.
The delay was widely interpreted as an attempt by Hunt to buy himself and News Corp more time, and hence prevent the deal from being subjected to a six-month inquiry by the commission.
In order for any takeover to take place, News Corp will first have to submit an improved offer to Sky's board.
In June last year, the subscription television provider knocked back an offer of 700p per share, which valued the subscription television provider at around £12 billion ($A19 million). The two companies subsequently deferred negotiations over a revised price pending regulatory approval.
Media Spy discussion: BSkyB