News Corp has withdrawn its bid to buy the 61 per cent of BSkyB that it does not already own.
The move comes hours ahead of a Commons vote which was expected see a majority of MPs reject the deal.
The bid was due to go to the Competition Commission. But this week it attracted fierce cross-party criticism amid new allegations surrounding phone-hacking and journalistic methods at the News of the World and other News International titles.
In a statement News Corp said that it “no longer intends to make an offier for the entire issued and to be issued share capital of British Sky Broadcasting Group not already owned by it”.
Chief operating officer Chase Carey said: “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.
“News Corporation remains a committed long-term shareholder in BSkyB. We are proud of the success if has achieved and or contribution to it.”
Speaking before the latest news broke, Professor of Communications at Westminster University Steven Barnett said: “Although the bid has been formally referred to the Competition Commission for a six-month review, the final decision rests with the Secretary of State. It is inconceivable, whatever the CC recommends, that any Secretary of State could subsequently approve the deal after a unanimous parliamentary vote opposing it.”
Speaking after the decision, Ed Miliband said: “This is a victory for people up and down this country who have been appalled by the revelations of the phone hacking scandal and the failure of News International to take responsibility.
“People thought it was beyond belief that Mr Murdoch could continue with his takeover after these revelations.”
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