Tony Banks, the sports minister, said it "set off alarm bells" while a United supporters' club described the planned sale as "ringing the death- knell of British football".
BSkyB, of which Mr Murdoch's News Corporation owns 40 per cent, and United, a stock market-listed business, confirmed yesterday that they have been holding negotiations for a friendly takeover of the club for five months and that the deal is almost done.
The negotiations have been between Mark Booth, BSkyB chief executive, and Martin Edwards, chief executive and major shareholder in Manchester United. It is understood the deal originated with Mr Booth and BSkyB's merchant bank Goldman Sachs. Mr Murdoch has not met the United negotiators.
Under the terms Mr Edwards and the management of United will stay in place, with the chief executive making an estimated pounds 80m for his 14 per cent share in the club. An estimated 21,000 fans who own shares should also make a big profit. The proposed deal values Manchester United at pounds 162m more than its closing price on Friday.
Mr Murdoch has bought baseball and basketball teams in America and is known to believe he needs to own teams to ensure sports develop in a way favourable to his television interests. The United deal would help him to lead the Premier League into a European Superleague and the televising of games by pay per view.
BSkyB's move has also been provoked by technical and regulatory developments that may soon let clubs sell coverage of games direct to fans via digital television, without sharing the proceeds with TV companies.
Mr Banks said: "You can't just let something like this happen because if it goes through it could open up all sorts of consequences involving any number of clubs afterwards."
Government sources went further, saying a full inquiry into the proposed takeover was inevitable. Ministers would have to consider the impact on sport and broadcasting as well as the law on competition.
Sources at BSkyB insist that the takeover would not be derailed by a referral to the Monopolies and Mergers Commission. In his takeovers of newspapers Mr Murdoch has always threatened to end a deal if it was referred.
Privately, ministers are worried that the Government will face criticism if it approves the deal, as that might be seen as currying favour with Mr Murdoch in the hope that his newspapers support Labour at the next general election. "We will have to tread cautiously and it may have to be stopped," said one source.
The Government is already under cross-party pressure to block the takeover. Joe Ashton, Labour MP for Bassetlaw and chairman of the all-party Commons group on football, said that if the Commons had been sitting, 100 MPs would have complained strongly that the deal involved unfair competition. "Are we going to see The Sun buying Chelsea and The Times buying Arsenal, and then maybe accountants in these clubs selling players for pounds 10 or pounds 10m to each other to balance the books? That cannot be fair trading," he said.
The Tory MP Roger Gale, vice-chairman of the Parliamentary Media Committee, accused Mr Murdoch of attempting to buy a vote around the Premiership table. Mr Gale, MP for North Thanet, said: "I am personally very saddened about this. I do not believe it is the place of media empires to own football teams."
Fans reacted badly to the news, with a small number gathering at United's ground to oppose the deal. Andy Walsh, of Manchester United Independent Supporters' Association, called on the Government to intervene.
A spokesman for Manchester United said: "Any decision taken by Manchester United will take into account the interests of shareholders, the club's fans, players and staff."Reuse content