UPDATE 1-News Corp bid to buy all of BSkyB-source

* Murdoch bid valued BSkyB at about $17.6 bln

* BSkyB rejected bid as too low, weighs options

* News Corp owns 39 pct of BSkyB (Adds background, details from Telegraph report)

NEW YORK, June 14 (Reuters) - Rupert Murdoch's News Corp NWSA.O approached BSkyB BSY.L with a bid to take full control of the British satellite broadcaster that valued the company at roughly 12 billion pounds ($17.6 billion), but was rebuffed, a source familiar with the matter said on Monday.

BSkyB, which has News Corp as its largest shareholder and Rupert Murdoch’s son James as its chairman, rejected the bid as too low, the source said. BskyB had a market cap of about 10.5 billion pounds.

BSkyB was looking into its options, the source said, declining to be named because the talks are private.

BSkyB could possibly shelve a deal for now, in case the two are not able to agree on the price, according to the Daily Telegraph, which first reported the news.

BSkyB’s board could meet Tuesday morning and the company is likely to make an announcement then as well, the paper said.

News Corp, home to Fox broadcasting and cable networks, the Twentieth Century Fox movie studios and newspapers including The Wall Street Journal and The Sun, owns 39 percent of BSkyB.

BSkyB and News Corp could not immediately be reached for comment.

A deal, if it happens, would give the media mogul complete control of Britain’s dominant pay-TV group and be one of News Corp’s largest acquisitions.

A deal could also put News Corp’s pile of cash to use. Last month, the company said it was evaluating options for the best use of its surplus cash. News Corp reported $8.2 billion of cash and cash equivalents as of March 31.

News of the bid follows speculation in March of such a move, when traders cited talk that Murdoch could take the British satellite broadcaster private. But an analyst at the time questioned why News Corp would do so, arguing that it already had effective control and could have acquired BSkyB in the past at an attractive share price.[ID:nLDE62B1W1]

Separately on Monday, News Corp branched into the digital reader market with the acquisition of Skiff, a Hearst-backed company that helps distribute newspaper and magazine content to e-readers and other devices. [ID:nN14212772]

It also said on Monday it made an investment in Journalism Online, a company that helps publishers reap revenue from online news. The terms of the deals were not disclosed. [ID:nN14212772]

Earlier this month, BSkyB agreed to buy Virgin Media's VMED.O basic channels as the two former fierce rivals developed strategies to compete with the soon-to-arrive free Internet-connected TV services. BSkyB agreed pay up to 160 million pounds in cash to expand its portfolio of basic pay TV channels. [ID:nLDE6530VK] (Reporting by Jui Chakravorty; Additional reporting by Jennifer Saba in New York and Caroline Copley in London; writing by Paritosh Bansal; Editing by Valerie Lee) (For more M&A news and our DealZone blog, go to