BSkyB said today that it had rebuffed an initial attempt by Rupert Murdoch's News Corporation to take full control of the UK satellite broadcaster.
The 700p-a-share approach for the 61% of BSkyB that NewsCorp does not currently own values the FTSE 100 Index company at around £12 billion.
BSkyB said the proposal significantly undervalued the business and called for an offer in excess of 800p a share, in part to compensate shareholders for the wait they would face while regulatory clearance was sought.
NewsCorp's interests include The Times and The Sun newspapers in the UK and the Wall Street Journal in America.
Despite their differences over price, the two parties have agreed to begin work on the regulatory process required for a tie-up.
Any transaction would be seen as a test of the Government's attitude to media consolidation and the power of the Murdoch empire.
Mr Murdoch's son, James, is BSkyB's chairman and a senior executive at NewsCorp, but is not involved in the bid process.
BSkyB said its eight independent directors, including former Asda boss Allan Leighton, considered there was a "significant gap" between the proposal from NewsCorp and the value of the company.
Nicholas Ferguson, senior independent director, added: "We believe the company has a track record of very strong performance and excellent growth prospects."
NewsCorp has been a major shareholder of BSkyB since the launch of the broadcaster in 1989. It currently own 39.1% of the company.
Chase Carey, NewsCorp's chief operating officer, said: "We believe that this is the right time for BSkyB to become a wholly-owned part of News Corporation with its greater scale and broader geographic reach."
The broadcaster has nearly 10 million customers and employs 16,000 people.
NewsCorp said the takeover was subject to clearance by the European Commission and "any other relevant competition or regulatory authority".
It added that its offer price represented a 22% premium on BSkyB's share price at the close of business on Wednesday, the day before it approached the broadcaster with its takeover proposal.
The New York-based firm said the cost of its 700p-a-share offer - £7.8 billion - would be met through cash on its balance sheet and borrowed funds.
BSkyB shares rose 19% to 715.5p today.Reuse content