The stock has since pared its gains, but was still 26 percent higher on the day.
Sky clarified that a formal offer has not been made by 21st Century Fox, nor is there any certainty that the company will make an offer to acquire the company.
Sky, a European media company which operates in five countries, said that 21st Century Fox has agreed to an offer price of £10.75 per share in cash, roughly $13.52. That figure does not include the value of any dividends paid by Sky. The proposal represents a 36.2 percent premium to Sky's December 8 closing price, which was the last business day prior to the announcement. The deal would value Sky at about $23.23 billion.
21st Century Fox is required to announce whether or not it intends to make an offer for Sky by January 6.
U.S.-traded shares of 21st Century Fox erased its intraday losses and were up as much as 6 percent Friday after the announcement. The stock later ended the day 1.5 percent.
21st Century Fox already owns 39.1 percent of Sky, and said in a news release Friday that it has "consistently stated" that its existing stake is "not a natural end position."
Sky has received financial advice from Morgan Stanley, PJT Partners and Barclays, and indicated to 21st Century Fox that the company is willing to recommend the proposal to its shareholders, depending on the terms of the offer.
Sky shares have fallen 10 percent so far this year, while Fox shares have gained 3 percent.