Suddenly, News Corp. Has Money to Burn

Though the deal was a year in the making, Rupert Murdoch’s News Corp. has abandoned its bid for full ownership of the satellite broadcasting company British Sky Broadcasting Group. The decision follows intense police and media scrutiny of fallen Murdoch newspaper News of the World, not to mention intense public pressure in the U.K. and a negative reaction from Wall Street. News Corp.’s withdrawal from the BSkyB deal signals the extent to which the News of the World phone hacking scandal has impacted business-as-usual at News Corp. But, for now, it also leaves News Corp. with $12 billion on its balance sheet that investor expected would be depleted from the company's coffers.

“Where does the company go from here in terms of using the cash it built up for the BSkyB deal that never was? I think the $5 billion share buyback is just a baby step,” Tuna Amobi, an equity analyst with Standard & Poor’s, said, referring to a stock repurchase program announced July 12. Amobi speculated that News Corp. might use this extra cash to raise dividends or pay special dividends to ease investors’ concerns. Though it has withdrawn from the deal, News Corp. has not foreclosed altogether on the possibility that it would some day, after the heat from the scandal dies down, try again. After all, this deal has been in the works for some time.