September 30, 2019 / 6:31 PM / 18 days ago

UPDATE 1-Mediaset debt rises as pan-European growth kicks in

(Recasts, adds details)

MILAN, Sept 30 (Reuters) - Italian broadcaster Mediaset reported a one-third increase in net debt in the first half as investments to create a pan-European TV player left their mark.

Like other free-to-air broadcasters, Mediaset is suffering stiffer advertising competition from web giants like Google and Facebook and is looking to cross border expansion to meet the challenge.

In May Mediaset bought a 9.6% stake in German rival ProsiebenSat.1 for about 350 million euros.

That increased net debt to around 1.2 billion euros at the end of June compared with 877 million euros at the end of December 2018, the company said in its 6-month results statement.

The Milan-based group, which is controlled by the family of former Italian prime minister Silvio Berlusconi, has since set up a plan to merge with its Spanish subsidiary Mediaset Espana under a Dutch holding company.

Mediaset wants to use the new entity as a platform to build alliances with other European peers, including a potential merger with ProsiebenSat.1.

Preliminary data showed it would cost about 1.33 million euros ($1.45 million) to pay Mediaset shareholders opting to cash out their holdings, the company said on Monday.

The number is well below a ceiling of 180 million euros it set up for investors who chose to head for the door.

Sources close to the matter told Reuters last week that French media conglomerate Vivendi, Mediaset’s second largest shareholder, did not exercise withdrawal rights on its 29 percent stake, worth around 1 billion euros.

Mediaset and the French media conglomerate have been locked in a protracted legal dispute stemming from a failed pay-tv deal in 2016.

Vivendi opposes Mediaset’s ongoing corporate overhaul saying the new entity’s governance strengthens the grip Mediaset’s top shareholder has on the group and is challenging the plan in law courts.

Should all Mediaset Espana investors with the right to withdraw from the deal decide to do so and cash out, Mediaset would face a potential outlay of about 380 million euros, according to Reuters’ calculations.

Shareholders of Mediaset’s Spanish unit have until October 10 to make up their minds.

To ensure a safe passage for its plans to create a pan-European TV player Mediaset agreed earlier this month a backstop worth up to 1 billion euros with private equity firm Peninsula (Reporting by Elvira Pollina: Editing by Angus MacSwan)

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