LONDON—The Murdoch family's 21st Century Fox Inc. already owns 39.1% of Sky PLC, but its latest effort to buy the rest of the British pay-television giant won't be easy as it faces potential hurdles from politicians, regulators and minority shareholders.

Asset-management firms and public pension funds that own Sky stock are questioning whether Fox's bid was fair to all stakeholders, given the close Fox-Sky relationship. And some investors and politicians want to examine whether such a deal would consolidate too much media power in too few hands.

The two companies said Friday that they had reached an agreement in principle for Fox to buy the remaining Sky shares it doesn't already own for £ 10.75 ($13.64) a share in cash, or about $14 billion. The bid represented a 40% premium to its closing price on Dec. 6, the last business day before Fox made its approach.

Sky closed up 1.6% at £ 9.88 in London trading Tuesday, below the offer price, underscoring investor uncertainty over the monthslong and uncertain U.K. regulatory review Fox likely faces if the offer proceeds.

Fox shareholders, too, are skeptical. The company's shares are down about 7% from their closing price on Thursday, the day before the companies announced the potential deal. Analysts said Fox might fund the Sky bid by halting remaining stock buybacks. Fox declined to comment.

Still, Fox faces fewer obstacles than it did in 2011, when its predecessor abandoned a previous takeover bid amid public anger over revelations that a now-defunct Rupert Murdoch newspaper had hacked into the phones of politicians and crime victims.

James Murdoch, one of billionaire media mogul Rupert's sons, is Fox's chief executive and Sky's chairman. The elder Mr. Murdoch and his family are major stakeholders in Fox as well as News Corp, publisher of The Wall Street Journal and three of Britain's biggest newspapers: the Sun, the Times and the Sunday Times.

Sky's board created an independent committee, composed of board members it considered to be free of conflicts of interest, to lead its negotiations with Fox, but some minority shareholders are skeptical.

Royal London Asset Management said creating an independent committee didn't go far enough to address potential conflicts of interest. Through a spokeswoman, Jupiter Asset Management fund manager Alastair Gunn said the committee should push for a higher price and that Fox's initial offer should be only the start of the conversation.

"All directors of Sky have a duty not to disadvantage the public shareholders," said Kieran Quinn, chairman of the Local Authority Pension Fund Forum, an association of 71 British public pension funds with about £ 175 billion in combined assets. Some of the funds hold Sky stakes.

In a statement, Mr. Quinn said he wanted to ensure that "the premium paid is appropriate and that shareholders are not disadvantaged by any temporary low in the share price." Sky's stock most recently traded above the offer price of £ 10.75 in February.

Fox hasn't made a formal offer yet. Should it do so, a government minister can refer the merger to Ofcom, Britain's telecommunications regulator. In debates Tuesday, lawmakers in the opposition Labour Party urged the government to do so, citing concerns about competition and plurality, or the concept of having a diversity of viewpoints across the media. The Conservative government declined to comment ahead of a formal offer.

Fox is expected to make the case that since its predecessor hived off its publishing assets in 2013, Fox has no news ownership in the U.K. except through its existing minority position in Sky, and therefore a combination won't affect diversity in media ownership.

Any deal also faces scrutiny from European Union antitrust regulators.

Fox has two ways to structure its proposed takeover: through a tender offer or through a so-called scheme of arrangement. A tender offer could allow Fox to obtain majority control of Sky more quickly but could delay its path to 100% ownership, meaning Fox might have to deal with minority shareholders for some time. By comparison, a scheme of arrangement allows the acquiring company to more quickly acquire 100% of the target firm but can be harder to pull off, in part because Fox's stake would be excluded from such a vote.

Ben Dummett and Nicholas Winning in London and Shalini Ramachandran in New York contributed to this article.

Write to Stu Woo at Stu.Woo@wsj.com

 

(END) Dow Jones Newswires

December 13, 2016 12:55 ET (17:55 GMT)

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