Sky Deutschland has advised its shareholders to reject a takeover offer from its larger, acquisitive brother British Sky Broadcasting Group (BSkyB), after the European Union's approval for the deal a week ago.
BSkyB earlier agreed to acquire 21st Century Fox's 57% ownership in Sky Deutschland for £2.9bn ($4.7bn, €3.6bn). 21st Century Fox became a 39% stake owner of BSkyB, after News Corporation rebranded itself and divided the company in 2013 into News Corp and 21st Century Fox.
"The Management Board and the Supervisory Board believe that the consideration offered by the Bidder does not reflect the full potential and thus intrinsic value of Sky Deutschland's business," the boards said in a joint statement.
BSkyB also offered to buy the shares of Sky Deutschland's minority shareholders for €6.75, representing a small premium on the company's current share price. However, the offer was deemed inadequate.
Sky Deutschland also said that CEO Brian Sullivan, who owns shares in both Sky Deutschland and BSkyB, would not participate in the offer.
BSkyB, which is also buying 21st Century Fox's 100% holding in Sky Italia for £2.5bn, is now facing a hitch in its European expansion plans.
Last week, Europe's antitrust authorities cleared BSkyB's German and Italian acquisitions, saying that the deals would not affect competition in the sector.
BSkyB earlier noted that its deal with 21 Century Fox is not dependent on the acquisition of minority shares.
With its acquisitions, BSkyB is looking to dominate a market that is largely untapped at the moment. Just three out of ten homes subscribe to pay TV in Germany and Italy, and with BT posing a real challenge to Sky in the UK, it may be looking to expand its market share elsewhere.
The German Sky has its origin in the analogue premium channel "Premiere". It was owned by Kirch Group, Bertelsmann and Canal+ and started broadcasting in 1991.