Wednesday, July 13, 2011

News Corp abandons BSkyB bid - a serious blow to the company's long term growth rate.

Abandoning the Sky bid is a serious blow to the company's long growth rate--magnitude is unclear. Our company enterprise value of $21.50 is based on the recent gains that BSkyB produced and therefore must  now be view as suspect. (See our post of Monday, July 11.) We think the big gains on Sky are behind it for the moment.

The increase in the share repurchase program amounts to an addition one time $1.50 dividend or about 10% return on the current share price. The action may hold the shares up--or at least cushion the fall. But, the optics look bad with reports surfacing that the company has been managing  aggressively its taxes--as it has always done--and that inquiries on hacking are opening in the US. The company's shares don't look especially cheap with the collapse of the BSkyB plan. We still see the shares as dead money for a long time.

News Corp abandons BSkyB bid - FT.com

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