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Investors to Murdoch: Give Us Cash!

News Corp. shares spike Tuesday as investors send a message to Rupert Murdoch: they'd rather have cash than BSkyB.

NEW YORK (TheStreet) -- News Corp. (NWSA) - Get Report investors would rather have hard, cold cash than yet another TV broadcaster.

That's the message the market sent to media lord Rupert Murdoch Tuesday after

British Sky Broadcasting

, the U.K. satellite-TV outfit, spurned News Corp.'s informal offer to buy the piece of BSkyB (about 61%) it doesn't already own.

The offer amounted to 700 pence per share, or 12 billion pounds, or $10.33 a share, or $17.7 billion -- not good enough for BSkyB, whose chairman happens to be Rupert scion James Murdoch.

But that doesn't mean BSkyB doesn't have its price. The company's board told News Corp. that 800 pence per share, or about13.7 billion pounds, sounds better. For you Yanks counting at home, that's a little more than $20 billion.

But the snub -- temporary though it may be -- appeared to gladden investors, who sent News Corp.'s A shares spiking by nearly 9% to $14.27 in New York trading Tuesday. Volume was torrid at 44 million shares as of 1:45 p.m. ET, double the daily average turnover in the name.

Some observers also worried that the BSkyB price tag -- both the 700 as well as the 800 pence figures -- seemed awful ripe. Miller Tabak analyst David Joyce wrote in a note to clients Tuesday that the valuation News Corp. says its 700-pence bid implies -- 11.8 times BSkyB's projected 2010 earnings -- is "far above" the value he would assign to the U.K. broadcaster, which posted a profit of about $420 million in the first quarter. BSkyB's appeal is chiefly sporting: the company owns the coveted English Premier League soccer broadcast rights, a cash cow.

Murdoch's Australio-Anglo-American media conglomerate has indicated that it would fund the BSkyB acquisition through cash and debt. (Any deal between the two companies will face stiff regulatory scrutiny from U.K. competition authorities, a process that News Corp. and BSkyB have already started.)

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Investors have been hankering for a portion of the cash horde that Murdoch has Scrooged away -- some $8.2 billion as of the end of March -- either through a dividend or a stock-buyback program, analysts say. Tabak's Joyce cautioned that News Corp.'s shares could be "under pressure in the near term" as investors await word of Murdoch's cash-distribution plans, though that certainly wasn't the case Tuesday.

As far as buying BSkyB, however, investors better not hold their breath. Murdoch in pursuit is a dogged customer, as everyone knows (especially the Bancroft family), and News Corp. and BSkyB already share a tight relationship.

In the end, then, Murdoch's urge for empire-building will probably win out over shareholders' desire for a taste of his cash.

-- Written by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.