Billionaire Vincent Bolloré’s move on Italian broadcaster Mediaset has all the hallmarks of tactics honed over four decades of dealmaking: aggressiveness, audacity and creeping control.
Within the space of 48 hours, Vivendi, the French media group that has come under Mr Bollore’s control as a result of such methods, had managed to amass a fifth of an Italian media group controlled by the family of Silvio Berlusconi, Italy’s former prime minister, through a series of trades.
The move — described by Mr Berlusconi as a “hostile takeover” — sets up a battle of the two media tycoons for the future of Italy’s biggest commercial broadcaster.
The reaction from the Berlusconi side was immediate: the family’s investment vehicle, Fininvest, lodged a complaint with prosecutors in Milan over market manipulation and it added a further 5 per cent of Mediaset to take its stake to near 40 per cent.
Mr Berlusconi said on Wednesday: “We have no intention to leave to anyone else the right to reshape our role as business owners. For this reason we are raising our stake and will continue to do within the limits of the law.”
The move by Vivendi comes during a period of political turmoil in Italy, but has still raised concern among the government. Italy’s economic development minister Carlo Calenda said that what “appears to be an unexpected attempt at a hostile takeover of one of Italy’s biggest media groups is not the appropriate means of reinforcing [Vivendi’s] presence in Italy”.
Mediaset also sounded the alarm. Fedele Confalonieri, chairman of Mediaset, said to employees on Wednesday: “It will be difficult but we shall defend ourselves from the stake building by Vivendi. It will not be easy . . . as French companies tend to cannibalise.”
Vivendi itself simply says that the stake will help develop its “strategic ambitions as a major international, European-based, media and content group”.
The stake building in Mediaset was carried in a series of purchases, with Vivendi first revealing a 3 per cent stake in the company on Tuesday, and then later that day declaring it owned 12.3 per cent.
“It’s typical Bolloré,” says François Godard, an analyst at Enders Analysis. “It’s very bold, it’s not a straightforward bid to buy a company and he’s obviously betting on dissent among the Berlusconi family.”
The stake building marks the latest twist in a public spat between Vivendi and Mediaset, which began amicably in April when Vivendi announced it was to take a 3.5 per cent stake in Mediaset and full control of the Italian broadcaster’s lossmaking pay-television business, Mediaset Premium. In return, Vivendi would hand Mediaset 3.5 per cent of its shares, worth about €880m.
At the time, analysts saw the pay-TV deal as just the first step in Vivendi trying to gain control of Mediaset, a pillar of Vivendi’s overall strategy to build a European media powerhouse, with France, Italy and Spain as its foundation. Mediaset’s channels dominate Italian and Spanish television with advertising market shares of 58 per cent and 43 per cent, respectively, in 2015.
But, initially, it seemed as though Vivendi had got cold feet over the Mediaset transaction. It backed out of the deal three months after it was announced, sending shares in Mediaset down 11 per cent.
This shift in strategy prompted legal action from Mediaset, which in August sued Vivendi in Milan to seek damages in connection with the delayed consummation of the deal. It estimated these to be €50m for each month since July that the deal was not completed and at least €1.5bn if it collapsed.
But it now appears that Vivendi is benefiting from Mediaset’s weakened position. Mediaset on Tuesday said that Vivendi’s strategic U-turn “resulted in a loss in Mediaset’s stock exchange value of around 30 per cent, a loss which Vivendi has taken advantage of today by making a massive market investment”.
The aggressive move by Vivendi has been taken by analysts as a sign that Mr Bolloré is back to building the Italian leg of his southern European media empire. He has firepower: there is €2.5bn in net cash on Vivendi’s balance to play with.
“This highlights that Vivendi’s defence against the Mediaset Premium court case is weak so Bolloré has decided to take a different tack,” says Joseph Oughourlian, founder of hedge fund Amber Capital Management. “He’s taking advantage of the fact that Mediaset’s stock is very undervalued by the market.”
The tensions between Vivendi and Mediaset are playing out against a backdrop of consolidation that is sweeping across the telecoms and media sectors on both sides of the Atlantic, driven by changes in distribution technologies and audience viewing habits.
Last week Rupert Murdoch’s 21st Century Fox moved to take full control of UK pay-TV company Sky, and Altice, the acquisitive investment vehicle run by French-Israeli billionaire Patrick Drahi, unveiled a further push into content.
Providers of telecoms infrastructure and media content are looking at how they can both increase and diversify revenues by bundling disparate communications, entertainment and utility services in single, customisable packages. They are facing increasing competition from video services such as Netflix that bypass traditional cable or satellite distributors by delivering content over the internet.
Given this strategic shift, the Mediaset stake is seen by analysts to be just one part of an Italian push by Mr Bolloré that has already led to Vivendi this year building up a 24.9 per cent stake in Telecom Italia, the former state-owned telecoms group.
Again, Mr Bolloré pursued similar tactics — stake building by Vivendi amid speculation over its future intentions that resulted in considerable control as the largest shareholder.
Telecom Italia and Mediaset together open up new possibilities for Vivendi in Italy, although analysts were still second guessing what Mr Bolloré might have in mind further down the line for Vivendi’s stake in Mediaset.
As second-largest shareholder, a full takeover of Mediaset by Vivendi could be difficult given the Berlusconi family’s hold on close to 40 per cent of the company through its Fininvest vehicle.
But Mediaset appeared to be in little doubt that the acquisition of the stake marked a shift in the ambitions of Vivendi from “industrial agreement to a hostile takeover”.
Should he seek control of Mediaset, Mr Bolloré could seek to combine his Italian holdings, according to some analysts. Market rumours have long suggested that France’s Orange could be a potential buyer of Telecom Italia should Vivendi seek to sell certain assets, potentially ending up a core shareholder of a merged French-Italian group. This would have the benefit of giving Mr Bolloré more clout back in France.
As ever, Mr Bolloré is keeping people guessing. “The Mediaset stake is just one action in an overall master plan which only Bolloré knows,” says one banker.
Additional reporting by Rachel Sanderson
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