BSkyB shares down 7pc over Murdoch takeover doubt

BSkyB shares dropped seven per cent today after the government said it would consider the closure of the News Of The World tabloid in its review of Rupert Murdoch's bid for the British pay-TV company, potentially pushing back any approval.

The Department for Media has examined News Corp's planned $14bn (£8.7bn) takeover of British pay-TV company BSkyB in terms of whether it will affect media plurality and the number of "media voices" present in Britain.

After the sudden closure of Britain's biggest-selling Sunday newspaper after a phone hacking scandal, the government warned that its final decision could "take some time" due to the number of responses submitted to a final consultation, which all add to an increasingly uncertain picture around the deal.

"The Secretary of State ... will consider all relevant factors including whether the announcement regarding the News of the World's closure has any impact on the question of media plurality," it said in a statement.

Shares in BSkyB were trading around 850p at the beginning of the week but have since slumped below 780p as the crisis engulfing Murdoch's media empire and its conduct in a phone hacking scandal deepened.

The British government had always said that the phone hacking scandal and BSkyB takeover were not linked from a legal standpoint but analysts, who had widely expected the deal to be approved, have started to turn more cautious.

"I don't see how this deal can go ahead now," said Panmure Gordon's Alex DeGroote while warning the speed at which events are unfolding meant investors were "into totally uncharted territory".

He cut his price target on BSkyB shares to 730p from 750p on what he judged to be a higher risk that the proposed deal with Murdoch's News Corp would collapse.