Silvio's Next Move: Salvage His Media Empire

6:00 AM PST 11/15/2011 by Scott Roxborough , Pamela Rolfe
Giorgio Cosulich/Getty Images

Silvio Berlusconi, who resigned as Italian Prime Minister on Saturday, is now fighting to keep control of his vast media empire. The news of Berlusconi’s resignation was greeted by spontaneous street parties across
Italy as citizens who had been demanding his resignation for more than a decade, finally got to say arrivederci to Europe’s most controversial leader.

But for a man who weathered sex scandals, alleged ties to the mafia and myriad widespread corruption charges while in political office, Berlusconi’s real battle now begins as others try and wrestle control of his and his family’s vast media interests from him.

“For years Berlusconi resisted, or ignored, public calls for him to resign, it was only when he saw staying Prime Minister was hurting his media business that he decided to step down,” said Tommaso Pedicini, an Italian journalist with German public broadcaster WDR. “After announcing his resignation, his first meeting wasn’t with his cabinet or advisors but with his family – his son Pier Silvio and daughter Marina - who run his media empire.”

Media holding Fininvest (Marina is chairwoman) and broadcasting giant Mediaset (Pier Silvio is program director and VP) dominate free-TV in Italy and, through subsidiary TeleCinco, Spain as well.

Other assets include production giant Endemol, makers of Big Brother and AMC’s Hell on Wheels, and venerable Italian soccer club AC Milan. In total, including sprawling real estate and banking assets, the empire is estimated to be worth around $5.4 billion.  

Having the company’s owner run the country has been good for Fininvest. Rome daily La Repubblica calculated that Fininvest enjoyed around $220 million in liquidity when Berlusconi entered politics in 1994. 17 years later, and despite a stagnant Italian economy, the figure stands at $1.6 billion.

Things could change now that Berlusconi is no longer in charge of passing media regulation and competition laws.

In an early November report, Nomura Securities analyst Matthew Walker said Mediaset “could be disadvantaged” by Berlusconi’s resignation as prime minister.

Already cracks have begun to appear in the Berlusconi empire. Shares in Mediaset have fallen some 50% since the start of the year, hurt by Berlusconi’s public scandals, which have shaken investor confidence.
Growth at Mediaset’s free-TV business is slowing, though it is still strongly profitable, and the company faces a major challenge in the Italian pay-TV market from Rupert Murdoch’s Sky Italia.

Then there’s Endemol, in which Mediaset invested some $680 million as part of an investment consortium, and which is now nearly $4 billion in debt and the target of takeover bids from, among others, Time Warner.
To make matter worse, Berlusconi is locked in a settlement battle with his estranged wife, Veronica Lario, who is angling for a major piece of Berlusconi’s business for herself and their three children (Pier Silvio and Marina are from Berlusconi’s first marriage) as part of a costly divorce.

And then there are the courts. Berlusconi faces charges in multiple court cases involving everything from paying a minor for sex to bribing a lawyer to lie in court. Without his current immunity as head of state, he could soon end up jail.

Silvio Berlusconi reportedly went into politics to protect his business interests. By leaving now, he hopes to save what he has built. But Italy’s mightiest mogul will have to fight off the courts, creditors and his own family if he hopes to keep his empire intact.
 
Georg Szalai in New York contributed to this report

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