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Mediaset and Vivendi are set for the latest showdown in a two-year stand-off that has pitted their billionaire owners, former Italian prime minister Silvio Berlusconi and French industrialist Vincent Bolloré, against each other.
Shareholders of Mediaset, Italy’s leading private broadcaster in which the Berlusconi family’s Fininvest holding company has a 45 per cent stake, will vote on Wednesday on a plan to create a pan-European media group to compete with the likes of Netflix.
The move to merge Mediaset’s Spanish and Italian operations into a new holding company based in the Netherlands follows Mediaset’s acquisition of 9.9 per cent of Germany’s ProSiebenSat. 1, bringing into its orbit a German TV group also broadcasting in Austria and Switzerland.
Vivendi, which holds 9.9 per cent of voting rights in Mediaset, plans to vote against the merger, arguing that it could give the Berlusconi family up to 86 per cent of total voting rights with only 38 per cent ownership.
Given the weight of the Berlusconi family’s shareholding, a revolt against its investment vehicle Fininvest will be hard to pull off as it would require unity among the fragmented minority investors that hold roughly a quarter of voting rights. Mediaset needs the support of 75 per cent of shareholders for the €3.9bn merger to proceed.
But analysts say the bigger story behind the latest spat is the increasingly heated battle for market share in European media, with traditional broadcasters fighting over ever shrinking turf as US dominance grows.
Mediaset’s push to create a pan-European media group have stolen the thunder from Vivendi, whose own plans to build a regional media champion announced two years ago have stalled.
Mr Bolloré and his lieutenant Arnaud de Puyfontaine are embroiled in legal proceedings in Italy amid an investigation for alleged market manipulation related to Vivendi’s 2016 acquisition of shares in Mediaset. They deny wrongdoing.
Mediaset has said the merger will create cost savings of more than €100m a year and generate returns for shareholders. But some observers believe there may be other reasons behind the move.
“I don’t buy [Mediaset’s] motives for doing this,” said François Godard, an analyst at Enders Analysis. “They have been operating in Italy and Spain for a while and have not achieved significant savings in these quite similar markets. But if they achieve [the merger] it will considerably strengthen the control of Fininvest — as a shareholder it will become unassailable.”
Vivendi’s 29.9 per cent stake in Mediaset is deemed illegitimate by the Italian company, which claims the way the French group bought its shares amounted to market manipulation. Italian regulators have also ruled that 19.1 per cent of Vivendi’s stake must be held in trust because of competition issues as Vivendi also holds a 24 per cent stake in Telecom Italia. That leaves Vivendi with 9.99 per cent of direct voting rights.
Nonetheless Stefano Gamberini, analyst at Equita, believes that Vivendi could well benefit from its ownership of Mediaset shares in the long term since its aim in building the stake in the first place was to create a European media group.
Proxy advisers are divided on the merits of the deal. ISS has advised investors to vote against the merger, warning of governance issues because it strengthens the voting weight of the Berlusconi family shares while weakening the voice of minority investors. But Glass Lewis has suggested investors vote in favour because of the strategic sense of the deal.
Should Vivendi fail in its attempt to block the merger by vote, it could decide to sell its 9.9 per cent stake, stopping the Italian company in its tracks as a condition of the merger is that no more than €180m is spent on buying back shares from investors that decide to leave the company.
Mediaset could waive the condition but would then risk having to pay up to €950m for Vivendi’s shares, according to a person close to the deal.
Vivendi’s hand was also strengthened in July when the European Commission advised that the Italian requirement for the French company to keep nearly 20 per cent of its stake in a separate trust might not be compatible with EU laws.
Should the European Court of Justice, which is expected to rule on the matter early next year, take the side of Vivendi, the Berlusconi family’s attempts to tighten control of the group would be further complicated.
This article has been amended to reflect that Mediaset’s new holding company will be based in the Netherlands
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