Vivendi Acquires Mediaset's Italian Pay TV Arm

Vivendi Chairman Vincent Bollore - H 2015.jpg

The French media giant expands its reach in Europe with the deal for part of the Berlusconi empire.

French media and entertainment conglomerate Vivendi has struck a deal to acquire Mediaset Premium, the pay TV unit of Silvio Berlusconi's Italian media giant Mediaset

Mediaset CEO Pier Silvio Berlusconi, the son of the former Italian prime minister, and Vivendi’s chairman Vincent Bollore have been in close talks since early last month, causing Mediaset’s stock to rise.

The takeover offer from Ballore’s group will be part of a more ambitious plan, aiming to create a European platform, involving France, Italy, Spain and Germany amid the advance of global players like Netflix.

Through its Canal+ Group and StudioCanalVivendi is already the leading French pay TV provider and one of the main international movie and television series producers and distributors.

Adding Mediaset Premium, and possibly other players over time, the newly formed pay TV joint venture would position it as one of Europe’s big pay TV providers.

The two companies will exchange 3.5 percent stakes. Vivendi agreed to obtain Mediaset's 89 percent stake in the Italian pay TV firm, which is valued at $1.02 billion by analysts according to The Wall Street Journal. The other 11 percent belongs to Spanish telecom giant Telefonica, which is also selling its share to Vivendi in the acquisition.

The deal is designed to strengthen the French media group's presence in Italy, where it already owns a stake of about 21 percent in Telecom Italia.

“You can expect an arrangement between Telecom Italia and the Italian pay TV business,” said Liberum Capital analyst Ian Whittaker of the deal. “It will also make it easier to finance content. Sky states it is easier to invest in original drama if you have more platforms on which to exploit.”

According to Italian analysts, the venture would also represent a direct challenge to pan-European pay TV giant Sky's Sky Italia, the main pay TV platform in Italy. Rupert Murdoch's 21st Century Fox owns a 39 percent stake in Sky. At the end of 2015, Sky Italia had about 4.7 million subscribers, compared with Mediaset Premium’s 1.9 million.

Last year, Berlusconi’s group reportedly refused Sky advances. The latter, according to chatter, was ready to pay about $1.2 billion for Mediaset Premium.