Rupert Murdoch's News Corporation has withdrawn its bid to take over BSkyB. News Corp CEO Chase Carey said it had become "too difficult to progress in this climate".

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News Corporation withdrew its bid to acquire BSkyB just before Parliament was due to vote on a motion calling for this to happen. All three party leaders had united against the bid in an almost unprecedented move.

In a statement, News Corporation said it no longer intends to make an offer for the entire "issued and to be issued share capital" of BSkyB that it does not already own.

Rupert Murdoch's News Corp, which owns the Sun and the Times as well as a 39 per cent shareholding in BSkyB, said it had become clear it was "too difficult" to proceed with the takeover bid in the current climate.

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Chase Carey, Deputy Chairman, President and Chief Operating Officer, News Corporation, commented: "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.

"A firestorm is engulfing parts of the media, parts of the police and indeed our political system's ability to respond." David Cameron

"News Corporation remains a committed long-term shareholder in BSkyB. We are proud of the success it has achieved and our contribution to it."

Under the terms of the takeover proposal, News Corp must now pay BSkyB a break fee of around £38.5m.

The withdrawal follows days of intense pressure on Rupert Murdoch's empire over phone-hacking allegations.

Downing Street welcomed the news and reiterated the Prime Minister's call for the company to "focus on clearing up the mess and getting its own house in order".

News Corp tabled its 700p-a-share approach for the 61 per cent of BSkyB that it does not currently own in June last year, a move which valued the FTSE 100 Index company at around £12bn.

Labour MP Tom Watson, who has been at the forefront of demands for action over phone-hacking, said that the decision to drop the BSkyB bid was not enough to draw a line under the scandal.

Mr Watson - a member of the Commons Culture Committee which has called Rupert Murdoch to give evidence next week - said unless someone at the top of the company apologises and "carries the can", the issue will continue.

It was announced on Wednesday that senior News International executive Tom Crone is to leave the company. Mr Crone, News International's legal manager, had worked for the company for over 20 years.

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Earlier David Cameron set out the details to a "robust" independent inquiry to be headed by Lord Justice Leveson.

The two-part investigation into the phone-hacking controversy will have the power to summon newspaper proprietors, police and politicians to give evidence under oath.

The investigation will look into the ethics and culture of the British media as well as the specific claims about phone hacking at the News of the World, the shortcomings of the initial police inquiry, and allegations of illicit payments to police by the press.

The initial part of the public inquiry should report on the regulation of the press within 12 months, Mr Cameron said. The investigations into allegations of wrongdoing in the press and police are expected to conclude later, once criminal proceedings have ended.

The family murdered schoolgirl Milly Dowler met the prime minister in Downing Street on Wednesday and said they were "delighted" about the public inquiry.

It was the third meeting they have had with senior politicians after it emerged Milly's phone had been hacked on behalf of journalists at News of the World when she went missing in 2002.