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Hacking Scandal Roils News Corp.'s BSkyB Bid

News Corp.'s plans to take full control of the U.K.'s largest multichannel operators, BSkyB, is running into growing opposition with the U.K. Deputy Prime Minister Nick Clegg calls for News Corp. to reconsider the buyout and British regulators delaying a decision on the bid amid growing outcry over the phone hacking scandal at News Corp.'s News of the World newspaper.

The scandal has already led to the arrests of several journalists and editors and resulted in the closure of the 168 year old tabloid News of the World paper on July 10.

News Corp. currently owns 39% of BSkyB, which is extremely profitable and by far the largest multichannel provider in the U.K. Last year it announced plans to buyout the other BSkyB shareholders and take full control, a bid that seemed almost sure to be approved by regulators prior to the hacking scandal.

Amid the mounting scandal, the U.K. Culture Secretary first delayed ruling on the bid and then referred the bid to The Competition Commission for further action, a move that could postpone any action on the bid for 24 weeks or more.

U.K. Deputy Prime Minister Nick Clegg has also called on News Corp. to "do the decent and sensible thing, and reconsider, think again, about your bid for BSkyB," a move many have interpreted as a request to drop the buyout.

Market worries about the prospects for the bid were reflected in the fact that share of BSkyB had fallen below the price News Corp. had offered shareholders.

Local U.K. press reports from The Guardian and the Independent are also reporting that News Corp. has withdrawn its plans to spin off the Sky News 24 hour news channel as a separate company 39% owned by News Corp.

News Corp. had offered the plan to regulators as a way of gaining approval of the buyout amid concern that the deal would give News Corp. too much power over the U.K. news market.