The company said that it had initiated preliminary discussions with 21st Century Fox, but added that it had not progressed beyond this stage and no agreement had been reached on terms, value or transaction structure.
"There is no certainty that a transaction will occur," the company said in a statement on Monday morning. "Any potential agreement would be subject to external factors including the Sky Deutschland share price continuing to trade on an undisturbed basis."
The potential deal, which was initially reported by Bloomberg news agency, would consolidate the European pay-TV assets of American Australian magnate Rupert Murdoch. His family is the largest shareholder in 21st Century Fox, which is shareholder in BSkyB. Murdoch's company also owns a 55 percent stake in Sky Deutschland and is the 100 percent owner of Sky Italia.
21st Century Fox also moved to confirm the rumors on Monday, but stated that numerous internal discussions had been undertaken over the years with no agreement between the parties ever being reached.
The deal would create a pan-European Sky conglomerate that could be better placed to take on the rising threats from streaming services like Netflix. Meanwhile, 21st Century Fox would be left to concentrate on its successful film business.
The original report from Bloomberg stated that the deal could be valued at 10 billion euros ($13.76 billion), and the companies have been in talks for months with a completion touted to be announced this summer.
Shares of Sky Deutschland rose 5.9 percent in early trade after the talks were confirmed on Monday morning. Shares in BSkyB were down almost 2 percent percent in early trade.
Commenting on the potential deal, analysts at Citi said that they saw "limited potential direct benefits", at least at this stage.
"The companies share a brand and in some cases technology and may see some scale efficiencies in areas like transmission," analysts Thomas Singlehurst, Catherine O'Neill and Jason Bazinet said in a note on Monday morning.
"But all other operations are separate. In due course, a move to pan-European customer service provision and, with it, pan-European rights negotiation, will likely increase the rationale for having a pan-European group, but this is a medium-term strategic consideration rather than one that would drive near-term financials."