December 13, 2016 / 4:14 PM / 9 months ago

Bollore turns up the heat on Berlusconi over Mediaset stake

File photo of Vincent Bollore, Chairman of media group Vivendi, reacts during the company's shareholders meeting in Paris, France, April 21, 2016. REUTERS/Charles Platiau/Files

MILAN/PARIS (Reuters) - French tycoon Vincent Bollore has raised the stakes in a battle with Silvio Berlusconi’s Mediaset (MS.MI) by saying Vivendi (VIV.PA) could buy up to a fifth of the Italian broadcaster, stirring talk of a hostile takeover bid.

Bollore is the chairman and biggest shareholder of Vivendi, which said on Tuesday it had raised its Mediaset stake to 12.3 percent. On Monday the French firm had said it had 3 percent of Mediaset but aimed to raise that to 20 percent as part of plans to expand in southern Europe.

But later on Tuesday, Berlusconi’s Fininvest, Mediaset’s controlling shareholder, said it had bought 27.6 million shares in the Italian broadcaster and had rights to buy 14 million more on Wednesday to reach 39.775 percent of voting capital.

Mediaset was not immediately available to comment.

The struggle between Vivendi and Mediaset highlights the pressure to consolidate among European media and telecoms groups, which are facing increasing competition from online providers such as Netflix (NFLX.O) and Amazon (AMZN.O).

Last week, Rupert Murdoch made a $14 billion bid for British pay-TV firm Sky Plc (SKYB.L), while the U.S. telecoms operator AT&T (T.N) is trying buy Time Warner (TWX.N) for $85 billion.

A source close to the matter said a hostile takeover by Vivendi was not on the agenda “today”, but that the French group wanted to strengthen its position to reopen discussions with the Berlusconi family.

“Vivendi prefers to go with a soft approach for now but if there is no way to discuss, we’ll have to reassess at this point,” the source said.

FEUD

A Vivendi spokesman declined to comment beyond reiterating the group’s statement from Monday.

If Vivendi takes 30 percent of the capital of the Italian broadcaster, it will be obliged to launch a takeover offer, under to Italian rules.

Bollore’s move has deepened a feud that began in July when the French company ditched an agreement to take control of Mediaset’s pay-TV unit, Premium, and give the two companies shareholdings in each other. Instead, the two groups are facing off in court, with a first hearing due in March.

Fininvest said on Tuesday it had filed a complaint with prosecutors in Milan and market regulator Consob against Vivendi, citing market manipulation.

Bollore, who is also a key shareholder in the Italian investment bank Mediobanca, has a record as a corporate raider, resorting to different strategies to take control of businesses.

“This looks like the typical Bollore pattern ... acquire a small stake, then build it up and then look to influence the direction of the company,” Liberum analysts said in a note.

Mediaset’s shares, under pressure since the pay-TV dispute, jumped as much as 36 percent to 3.69 euros ($3.93), their biggest one-day gain recorded since the company listed in 1996. Vivendi shares closed flat.

The market is also speculating about Bollore’s real intentions in Italy, drawing parallels between Mediaset and Vivendi’s aggressive stake-building in Telecom Italia (TLIT.MI) last year. Vivendi now has a 24 percent stake in Telecom Italia and partnerships with Orange (ORAN.PA) and Iliad (ILD.PA).

“MEDIA CORNERSTONE”

“This is just the first page of a new story,” Mediobanca analysts said in a note.

“A group like Mediaset - leader in commercial TV in Italy and Spain, strong skills in content production, with a well established pay-TV business - is a cornerstone for everyone willing to set up a media platform, with strong focus on southern Europe.”

Mediobanca, which has an ‘outperform’ rating on Mediaset and a 3.96 euro target price, said uncertainty over the Premium saga and Italy’s constitutional referendum had pushed Mediaset’s shares down to a 50 percent discount against its peers.

“Given the potential speculative angle, we believe Mediaset should trade at least in line with peers.”

Fininvest accused Vivendi of trying to depress the company’s share price by dropping the pay-TV deal in order to then launch a hostile takeover at a discount.

Some bankers have suggested Vivendi may eventually seek to combine Telecom Italia and Mediaset. All parties have repeatedly denied such speculation.

Analysts expect both Vivendi and Fininvest to raise their Mediaset holdings in coming months, underpinning the share price, but said a full takeover seemed unlikely in the short term, given the size of the Berlusconi family’s stake.

Fininvest said it did not plan to diminish its role as a major investor and would use all means to block Vivendi’s move.

Mediaset still aims to pursue its legal battle against the French company, and said it had hired top Italian banks Intesa Sanpaolo (ISP.MI) and UniCredit (CRDI.MI) as advisers.

Additional reporting by Mathieu Rosemain in Paris, Sophie Sassard in London and Francesca Landini in Milan; Editing by Silvia Aloisi, Jane Merriman and Kevin Liffey

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