Tuesday, 3 April 2012

James Murdoch steps down - a step towards leaving the UK?

Photo by Esther Dyson

BSkyB has announced that James Murdoch will step down today as Chairman of BSkyB, to be replaced by senior independent director Nicholas Ferguson.

James Murdoch has already resigned from directorships at News International and Glaxo but will remain on board as non-executive director at BSkyB. The resignation comes just weeks before a report from the Culture, Media and Sport Committee on reporting practices at the News of the World and  just before both Rupert and James Murdoch give evidence to the Leveson enquiry. We feel that James Murdoch is trying to pull out of the UK given the continuous political and public opposition.

At the AGM, Mr Murdoch was supported by large institutional shareholders and by the board, although 40% of the independent directors opposed him. The possibility of Mr Murdoch stepping down has been around for some time we do not believe this news will move the shares (indeed, they have been broadly flat on the news). The key question remains whether News Corp will be deemed a “fit and proper” company to hold such a large stake in a significant UK media company. Failing the “fit and proper” test would mean News Corp having to sell a significant portion of its 37% stake, which would definitely be a negative for BSkyB. However, we believe the steps News Corp is taking are trying to address this issue. Furthermore, we expect that News Corp may come back at some point with a bid for the shares it does not already own.

Nicla Di Palma, CFA
Equity Analyst, Brewin Dolphin

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