Rupert Murdoch's News Corp. dropped its $12 billion bid to takeover British Sky Broadcasting today. With the company in the midst of a massive journalistic scandal, the deal had lost the support of the British government.
"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," said Chase Carey, News Corp.'s deputy chairman and president in a statement.
BSkyB stock declined 4 percent following the announcement.
The deal would have given Murdoch 100 percent control of BSkyB and 40 percent ownership of all British commercial TV. He already owns 37 percent of newspapers in Great Britain.
Prior to the announcement, the House of Commons had planned a vote in which all three major political parties were to demand News Corp. withdraw its offer.
Prime Minister David Cameron said he appointed a senior judge to lead an inquiry into the hacking of phones and alleged bribery carried out by the now-defunct News Corp. tabloid, News of the World. The investigation will also look into an allegation that a U.K. reporter tried to obtain phone numbers of 9/11 victims.
"There is a firestorm, if you like, that is engulfing parts of the media, parts of the police, and indeed our political system's ability to respond," said Cameron in the House of Commons.
Cameron said now the focus must be on the victims, and prosecuting the guilty.
The widening scandal has already resulted in eight arrests and could lead to a dozen more by the end of the week, including several police officers who allegedly took regular bribes from the paper in exchange for news scoops, and Murdoch's son James Murdoch, a chairman at News International. No one has been charged.
The best-selling News of the World weekly newspaper shut down after 168 years on Sunday, leaving its 270-person staff without jobs after it became embroiled in an epidemic of criminal activity in pursuit of stories -- including allegedly hacking the voicemails of murder victims, terrorist victims and their families, not to mention a number of celebrities.
A power network that includes Murdoch, British politicians and police is now accused of suppressing a full investigation, while former News of the World editor Andy Coulson and former royal editor Clive Goodman were arrested last week on charges related to the paper's hacking scandal.
In the eyes of many, the often sensational weekly tabloid was brought down by management that still refuses to acknowledge its own role in the ongoing scandal.
Rebekah Brooks is at the forefront of these allegations. A major player in the U.K. media world, Brooks is now a chief executive for News Corp., the parent company of News of the World, but she was an editor of the paper during the time of the alleged phone hackings.
And while 270 people -- many of whom had nothing to do with the phone hackings that took place years ago -- lost their jobs last week, Brooks, a close ally of Murdoch's and a friend of British Prime Minister David Cameron, remains in her current top position -- with Murdoch's full support.
Brooks insists she had "no knowledge whatsoever" of the hackings or any other case while she was editor, according to a letter published by Britain's home affairs select committee Saturday.
"Eventually, it will come out why things went wrong and who was responsible, and that will be another very difficult moment in this company's history," Brooks said.
James Murdoch, who sits as chairman of News Corp. in Europe and Asia, also claims to have known nothing of the newspaper's illegal practices.
The Associated Press Contributed to this story.