The market is being “overly pessimistic about the lack of scope for a takeout” of the broadcaster, broker Citigroup said. News Corp already owns about 39pc of the FTSE 100 company and dropped its bid to take control of the group last year as the scandal over phone-hacking by staff at News Corp’s papers blew up, causing public and political outcry.
Analysts at Citi said the proposal to split News Corp into a film and television group and a book and newspaper division “may go some way to resolving political obstacles to a deal with BSkyB”. Mr Murdoch will be chairman of both companies.
Citi’s analysts also pointed out that News Corp could make a bid for sister business Sky Deutschland (LSE: 0MGA.L - news) , in which News Corp has a 49pc holding, after a positive tax ruling in Germany.
Despite highlighting that a new bid could come in as high as 900p, compared with the offer back in 2010 of 700p, investors did not appear persuaded by the argument, with shares in the blue-chip broadcaster closing 8½ lower at 766½p.
Nevertheless, the wider market put in a better performance, with the FTSE 100 advancing 9.34 points to 5,901.42, the highest level in seven weeks. Sentiment was helped by mounting expectations a political compromise will be reached on the US “fiscal cliff”, spending cuts and tax increases that threaten to drag the country back into recession. As a result, riskier mining shares were stronger, with Antofagasta (Other OTC: ANFGF.PK - news) leading the blue-chip risers with a gain of 41p to £13.37. Eurasian Natural Resources Corporation (BSE: CORPBANK.BO - news) put on 6.1 to 283.3p and Vedanta Resources (LSE: VED.L - news) rose 24p to £11.18.
Industrial (Mexico: ST2000.MX - news) pump maker Weir Group (Other OTC: WEIGF.PK - news) suffered the heaviest fall on the main board with a drop of 64p to £18.17. One dealer said the shares lost ground on competition concerns after Caterpillar (NYSE: CAT - news) and Ariel Corp announced a joint venture to make pumps.
Rolls-Royce came under pressure after the engine-maker revealed it had passed information on possible bribery and corruption to the Serious Fraud Office. Nervous investors sent the shares down 28½ to 885p.
Sage Group (Other OTC: SGGEF.PK - news) , which reported full-year results on Wednesday that highlighted tough conditions in France, fell 6.4 to 294p after Natixis (Dusseldorf: 489526.DU - news) cut its recommendation on the software business to “neutral” from “buy”.
A downbeat assessment of asset manager Schroders (Berlin: PYX.BE - news) weighed on its shares. Broker Canaccord Genuity argued that management will not boost returns to minority shareholders and cut its recommendation to “sell” from “hold”. Schroders dipped 2p to £16.30 as a result. Hargreaves Lansdown lost 15 to 728½p after Morgan Stanley (Dusseldorf: 653571.DU - news) cut the investment manager to “equal weight” from “overweight” following a strong showing from the shares.
At the other end of the table, Barclay s was among the biggest risers, buoyed by South African bank Absa’s acquisition of the British lender’s African business. The FTSE 100 lender added 4.1 to 250½p. Also making gains was Standard Chartered (Other OTC: SCBFF.PK - news) , which said it is likely to pay a further $330m (£205m) to US regulators to settle allegations it contravened Iran sanctions. Oriel Securities noted a resolution to matters in the US should eliminate “a key uncertainty over the investment case”. The shares ticked up 12p to £15.00½.
Some analysts were looking ahead to next year, with JPMorgan Cazenove selecting Babcock International as its top UK share pick for 2013. The bank argued that the group may have received a lift from uncertainty over the future of rival BAE Systems (LSE: BA.L - news) , which failed to merge with EADS (Euronext: EAD.NX - news) in October, sparking speculation the company could be a bid target.
Babcock edged up 10 to 996½p, while BAE, which announced a £46m submarine maintenance contract with the Ministry of Defence, closed 4.8 higher at 337.8p.
On the mid-cap FTSE 250 up 46.12 points at 12,149.23 Imagination Technologies was the stand-out riser, bolstered by an enthusiastic appraisal from JPMorgan, which said the company is “exposed to high-growth markets” such as tablets and smartphones. Analysts at the broker expect the chip designer to meet or exceed expectations when it releases first-half results on Wednesday and argued that the shares have “considerable upside on a mid-term view”. Imagination put on 25½ to 426½p.
Electronics distributor Premier Farnell (Other OTC: PIFLF.PK - news) also rose, despite reporting a 10.8pc drop in third-quarter pre-tax profits to £17.3m. The group said it was cutting costs that will deliver £4m in annualised savings.
“Premier’s balance sheet is expected to strengthen significantly over the next few years as expensive debt is repaid,” said Shore Capital analyst Robin Speakman, who has a “hold” rating on the shares, which rose 5.6 to 182.7p.
Among the small caps, car repair and replacement business Helphire advanced 0.36 to 2½p. One dealer speculated investors were buying on the back of the icy weather conditions that have hit Britain, which could lift demand for the group’s services.
Helphire highlighted in a November (Xetra: A0Z24E - news) trading update that the “winter months have a significant weighting in respect of the group’s trading”. Investors are also waiting for developments regarding potential legal settlements.
Iron ore group Afferro Mining was in demand after confirming it was in talks that could result in a takeover or “strategic investment” in the group. Shares in the Cameroon-focused business climbed 9.375 to 75.875p. Panmure Gordon saw “significant upside” in the shares and has a target price of 279p.