News that Disney will snap up a raft of 21st Century Fox's entertainment assets including Sky sent the broadcaster's shares to the bottom of the FTSE 100 and dragged the blue chip index into the red.
The FTSE 100 ended the day down 0.65% or 48.39 points at 7448.12, with Sky among its biggest fallers down 1.8% or 19p at 990p.
The 52.4 billion US dollar (£39 billion) deal sparked investor jitters over Sky's future under Disney, which will take on a 39% stake in the business.
That is despite reassurances from Disney chairman and chief executive Bob Iger, who told Bloomberg TV: "Absolutely. All of Sky has a future.
"We obviously will look at the overlap between the business that are similar ... ultimately we believe we're going to create a lot of opportunities for a lot of Fox employees, opportunities beyond the ones they have today."
In currency markets, the pound was trading higher by 0.15% versus the US dollar at 1.343, but climbed 0.5% against the euro to 1.140 as investors reacted to comments from European Central Bank president Mario Draghi, who flagged uncertainty over the eurozone's inflation outlook as the central bank left interest rates on hold.
Elwin de Groot, head of macro strategy at Rabobank, said: "Basically the only key message from today's press conference was that the economic prospects have substantially improved but that we should not draw any conclusions from that yet with regard to the assessment of the inflation outlook and the policy stance."
Investors were less excited by comments surrounding the Bank of England's interest rate decision, which resulted in a 9-0 vote by the Monetary Policy Committee to keep rates at 0.5%.
The pound was relatively flat following the announcement at midday.
Across Europe, the French Cac 40 and German Dax ended the day down 0.78% and 0.44%, respectively.
In oil markets, Brent crude prices were flat at 62.75 US dollars per barrel as the closure of the Forties pipeline in the North Sea was countered by higher forecasts for US oil output growth next year by the International Energy Agency, raising fears of oversupply.
In UK stocks, Sports Direct shares dropped 8.5p to 374.9p after statutory pre-tax profits plunged 67.3% for the half year to October 29, which the company put down to "fair value adjustments and transitional factors such as the disposal of assets".
The retailer also reported falling UK retail sales amid store closures, reduced online promotions and higher costs liked to the weaker pound.
Lonmin surged 12.75p to 76.5p after the platinum miner agreed to a takeover by South African rival Sibanye-Stillwater in a £285 million deal.
Shares in Ocado edged higher by 2p to 343.6p despite revealing slowing sales growth in the fourth quarter, having suffered from a shortage of delivery drivers in London and the South East.
Mitie dropped 4.5p to 199.5p despite clinching a 10-year contract with the Home Office worth half a billion pounds to supply immigration services starting in spring 2018.
The biggest risers on the FTSE 100 were Land Securities up 30.5p to 978.5p, Mondi up 51p to 1,775p, Mediclinic International up 15.5p to 621.5p, and BT Group up 5.85p to 273.85p.
The biggest fallers on the FTSE 100 were Standard Life Aberdeen down 13.7p to 413.8p, Convatec Group down 6.1p to 203.2p, British American Tobacco down 104.5p to 4,924.5p, and CRH down 53p to 2,530p.
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