Sky chiefs urged to seek higher 21st Century Fox bid amid Murdoch concerns
Sky's independent directors are facing pressure from shareholders to push for a higher price from Rupert Murdoch and not sell the broadcaster on the cheap.
21st Century Fox, which is owned by the media mogul, tabled a proposed cash offer of £10.75 per share on Friday, valuing Sky at £18.5 billion.
However, investors have questioned the value of the deal and raised concerns about the involvement of Mr Murdoch's son - James Murdoch - who is Sky's chairman and Fox's chief executive.
Thomas Moore, investment director at Standard Life Investments, told the BBC that the role of James Murdoch in the two companies means "this can't be an arms-length deal".
"There's heavy representation of people aligned with Rupert Murdoch, not just James Murdoch," he said.
"Shareholders - our clients ultimately - are reliant on this independent board to come up with a solution which will represent proper value.
"There are concerns, given the composition of the board, that that cannot be the case. We would hope this is a starting bid and on reflection they will appreciate that a higher bid is more appropriate."
On Friday, the two firms said talks would continue and there was no certainty that a deal would be struck.
The bid represents a 40% premium on Sky's share price on Tuesday December 6. Including all debt, the proposed deal values Sky at £25.3 billion.
Alastair Gunn, a fund manager at Jupiter Asset Management, told the Sunday Telegraph that Fox's approach "ought to be the start of the process, not the conclusion".
Fox, which already owns 39% of Sky, has until January 6 to announce a firm intention to make an offer, after which the Government has 10 days to refer the deal to Ofcom.
The decision on whether to ask Ofcom to investigate the takeover will fall to Culture Secretary Karen Bradley and will come five years after Mr Murdoch last took a tilt at Sky through News Corporation.
The company - which owns The Sun and The Times - was forced to abandon its plans after becoming embroiled in the phone-hacking scandal involving News International.
News Corp's bid faced opposition from rivals in the media industry and some politicians before it was scuppered by acute pressure on the company brought about by phone-hacking claims.
Jerry Dellis, equity analyst at Jefferies, said: "Ofcom's historic reservations about media plurality seem less credible now with more fragmented landscapes of news distribution and TV, also the split of legacy News Corp TV and press interests.
"Fox's promise that a merger would secure the UK's position as a major hub for content generation and technological innovation may please Ofcom."
Sterling's 16% plunge against the US dollar in the wake of the Brexit vote is also thought to have been a catalyst behind Fox's swoop for Sky.
Russ Mould, AJ Bell investment director, said: "Friday's bid for Sky from 21st Century Fox and today's all-cash offer for FTSE Small Cap stock e2v Technologies are the two latest examples of UK-quoted firms attracting an overseas predator and the pound's post-Brexit plunge means more deals are likely."
The Sky offer comes after News Corporation dove into the digital radio market in June by making a £220 million swoop for Wireless Group, the owner of TalkSport.