* Fox to keep price unchanged at 10.75 pounds - sources
* Sky had rejected previous proposal - source
* Murdoch to keep Sky CEO Darroch as he seeks continuity -sources
* UK government said has not yet received formal notification
* Talks started after the U.S. election, Time Warner deal a trigger (Adds political details)
By Sophie Sassard and Kate Holton
LONDON, Dec 12 (Reuters) - Rupert Murdoch's Twenty-First Century Fox aims to table a firm cash bid valuing British broadcaster Sky at 10.75 pounds per share as early as Wednesday for the 61 percent of the company it does not already own, four people familiar with the matter said.
The two companies have agreed to press ahead with a scheme of arrangement, two of the sources said on Monday. That is a court-approved agreement typically used in friendly takeovers in the UK which requires 75 percent approval from shareholders, against 90 percent through a straight takeover under UK rules.
Were Fox to get the deal approved by 75 percent of Sky's independent shareholders, the scheme structure would make it easier to get full approval and delist the company.
Several small shareholders including Standard Life, Jupiter Asset Management and Royal London have already sought a higher price and questioned the initial green light given by Sky's Independent Committee, and the sources said Sky could push for a sweetened bid once a firm offer is tabled.
But they said Fox did not plan to increase its bid for the time being as it had already significantly improved a previous offer which was not made public. Murdoch is also expected to keep Sky's chief executive Jeremy Darroch to run the business as he wants continuity for the company, two of the sources said.
Murdoch's Fox said on Friday it had struck a preliminary deal with Sky's independent directors to buy the firm, five years after a phone hacking scandal at one of Murdoch's British newspapers derailed a previous attempt.
Matt Hancock, a junior minister in the department of media, said the government would follow the correct procedure after opposition politicians told parliament on Monday that the events of 2011 showed that any new deal had to be closely scrutinised.
"If a bid at this level is forthcoming, shareholders themselves will have the opportunity to accept a price which reflects a 40 percent premium or they can chose to continue to hold their stock," said a Sky spokesperson reacting to Reuters' report. Fox declined to comment.
If successful, Murdoch's second attempt to acquire the rest of Sky would give him full control of a pay-TV network spanning 22 million households in Britain, Ireland, Austria, Germany and Italy.
Murdoch, who also owns the Sun and The Times newspapers through NewsCorp, which has now separated from Fox, has long seen a tie-up with Sky as a logical, strategic deal and is especially keen to get direct access to Sky's customers, one of the sources said.
Sky created the Independent Committee of directors to assess the deal in a move to ease shareholders' concerns on governance given that James Murdoch is both the chairman of Sky and the chief executive of Fox.
"It would have been preferable to have an independent chairman," said Piers Hillier, CIO at Royal London Asset Management. "The creation of an independent committee of the board (excluding James Murdoch) to consider the bid addresses some of the conflicts of interest, however it doesn't go far enough."
Fox had previously tried to expand in its home market but had to abandon a $80 billion deal to acquire Time Warner after the company rejected it.
AT&T's successful $85 billion bid for Time Warner in October was one of the triggers pushing Murdoch to grow by bidding for Sky, said one of the sources adding that the two companies started talks shortly after the U.S. election.
Sky was down 33 percent so far this year before Fox's offer emerged. It has now rebounded on the prospect of a deal but is still down 11 percent compared to January, according to Thomson Reuters data.
"In terms of valuation, the offer is at the low end, considering stock price levels at the end of last year as well as our internal intrinsic value," said Kai Fachinger, senior portfolio manager at RobecoSAM, a minority Sky shareholder which recently increased its stake in the British company.
"Assuming some cross-synergies, both on cost and revenue, we would expect the fair premium to be some 5-10 percent higher at least."
However, the mean average of 22 analysts polled by Thomson Reuters currently price Sky at GBP 10.31.
"We are broadly supportive of it (the deal)", said Jamie Forbes-Wilson, manager of several AXA funds which together have a small shareholding in Sky.
"Clearly the higher the share price the better, but I think ... it was always likely given their significant stake already that they would be under perhaps less pressure to offer a knock-out bid."
A top-30 shareholder said he would likely vote for the deal.
"It would be nice to have a bit more but obviously Fox are holding all the cards - we are being pragmatic on this one."
Sky's spokesperson said the company held an investor day less than two months ago that gave investors a comprehensive insight in to the company and its growth plans. "The market took a view and fully priced in these opportunities prior to the possible offer", the person said.
Fachinger said he expected Murdoch to push through a deal "whatever it costs" after his failed 2011 attempt.
That attempt provoked uproar among some UK politicians, who said it would give the billionaire owner of The Sun and The Times newspapers too much control over the country's media.
It collapsed when Murdoch's UK newspaper business was engulfed in a phone hacking scandal that intensified political opposition, resulted in a criminal trial and led to the closure of his News of the World tabloid.
Hancock, the minister responsible for digital policy, told parliament on Monday that the government had not yet received a formal notification and that any transaction would be looked at on its merits, on a case by case basis.
The Secretary of State for media would seek to decide within 10 days of notification whether the deal needs to be referred to the regulator for further scrutiny, he said.
People familiar with the matter said Fox had seen the opportunity to try again after Britain's vote to leave the European Union in June sent the pound down about 14 percent against the U.S. dollar and Sky's share price tumbling. ($1 = 0.7932 pounds) (Reporting by Sophie Sassard and Kate Holton in London; additional reporting by Pamela Barbaglia, Carolyn Cohn and Simon Jessop; editing by Philippa Fletcher)
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