July 13, 2011 6:32 PM

Five Firms See Deal Work Scuttled as News Corp. Bails on BSkyB Bid

Posted by Tom Huddleston Jr.

Rupert Murdoch’s News Corporation abandoned its $12.5 billion bid for British Sky Broadcasting Group (BSkyB) Wednesday amid growing public opposition to the deal and mounting political pressure over a phone-hacking scandal that has been widening by the day.

News Corp.’s bid to acquire the 61 percent of the United Kingdom's largest pay-television provider had been shaping up as the capstone of Murdoch's career. Instead, revelations that reporters and editors at the now-shuttered News of the World tabloid had hacked the voicemail accounts of celebrities, politicians, terrorist-bombing victims, and even an abducted teenage girl have sent the media baron into retreat.

As The Am Law Daily has previousy reported, Skadden, Arps, Slate, Meagher & Flom has been advising News Corp. on the now-defunct deal.  Hogan Lovells and U.K. firm Allen & Overy have been acting as counsel on competition issues for the company, while Cleary Gottlieb Steen & Hamilton have provided antitrust counsel. Herbert Smith was representing BSkyB. It was unclear Wednesday what the death of the deal means for the firms.

In announcing that the company was ending its pursuit of total control of BSkyB, News Corp. deputy chairman Chase Carey said in a statement: "We believed that the proposed acquisition of BSkyB by News Corporation would benefit both companies but it has become clear that it is too difficult to progress in this climate."  Carey noted that given its existing 39 percent stake in BSkyB, News Corp. remains a major shareholder in the broadcaster.

With the phone-hacking story catching fire, The Am Law Daily reported on July 8 that the scandal had begun to put the deal in jeopardy by pushing the company's stock price down amid a massive public outcry. On Tuesday, Prime Minister David Cameron and numerous members of Parliament said they would back a motion to block the BSkyB deal for BSkyB.

In a separate development, U.K. Legal Week reported that Tom Crone, legal manager of News International, News Corp.’s British subsidiary, has resigned from the company.

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