Vivendi, Mediaset Engage in War of Words as Acquisition Deal Falls Apart

Mediaset CEO Pier Silvio Berlusconi Getty - H 2016
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The two European giants exchange tit-for-tat interviews and editorials in a battle over Vivendi's plans to acquire Mediaset's pay-TV arm.

Two of Europe’s major media groups are having a very public battle over a deal gone bad.

France’s Vivendi, controlled by French takeover king Vincent Bollore, and Mediaset, the company run by former Italian Prime Minister Silvio Berlusconi, are engaged in a fierce war of words connected to a proposed buyout of Mediaset's money-losing Italian pay-TV business by Vivendi.

The deal, first announced in April, was billed as a potential game changer. By uniting the Vivendi's French pay-TV network CanalPlus with Mediaset's operation, the new company could form a pan-European group to take on the likes of Netflix and Amazon. The agreement would see both companies take a 3.5 percent stake in the other.

But shortly after the deal was announced, Vivendi backed out. Calling Mediaset's financial projections "unrealistic," the French company in July dropped a binding agreement to buy the Italian pay-TV division and proposed new terms.

That ignited the media war, with the heads of the two conglomerates lashing out in competing interviews and op-eds.

Marina Berlusconi, Silvio's oldest daughter and chair of Fininvest, the holding company that holds a 38.6 percent stake in Mediaset, shot first, with an editorial in Italian daily Corriere della Sera that called Vivendi’s actions and Bollore’s business behavior unethical.

“We know perfectly well that the business world has its harsh rules, the law of the market can be ruthless,” she wrote, but that business requires “fairness, honesty, consistency of behavior.” She implied that Bollore’s conduct and character are unethical and personally greedy.

Vivendi CEO Arnaud de Puyfontaine responded in an interview in French business daily Les Echos that the Italians need to deliver a strong business plan instead of cheap shots.

Berlusconi's son Pier Silvio Berlusconi joined the fray in an interview with the Financial Times, in which he disputed Vivendi's claims that it did not know Mediaset's true condition before agreeing to the deal.

“Making the argument that they do not know the accounts does not hold,” Berlusconi told FT. “It’s laughable. The contract is binding.” Berlusconi added that he is considering legal action. "We must protect ourselves," he said.

“Both Bollore and Berlusconi are masterful deal-doers and strong personalities, hence there are bound to be disagreements over asset valuation. Some of this will be posturing,” Peel Hunt analyst Alex DeGroote told The Hollywood Reporter.

Bollore has become the new star on the European media scene. With a stake of more than 15 percent in Vivendi, he has kicked off a buying spree at the French giant. Vivendi completed a hostile takeover of gaming company Gameloft in June and has another underway at gaming company Ubisoft. Bollore made a €3 billion ($3.4 billion) investment in Telecom Italia, turning Vivendi into the Italian group’s biggest shareholder with a 24.9 percent stake.

Bollore's big-picture play is to turn Vivendi, a former telecom company, into a pan-European, and eventually global, media and content powerhouse. The group already controls film and TV production group Studiocanal and the unprofitable French pay-TV channel CanalPlus, Universal Music Group and YouTube competitor DailyMotion, an event ticketing business, as well as the new game holdings. Bollore also has been creating synergies with his own ad company Havas.

In his interview with Les Echos, de Puyfontaine argued that Mediaset is not essential to Vivendi's pan-European strategy. The company's stake Telecom Italia is just below the 25 percent threshold that would force it to launch a takeover bid. De Puyfontaine said that stake has allowed Vivendi "to gain a foothold in infrastructure and places [the company] in a good strategic position."

Mediaset owns free-to-air channels in Italy and Spain, as well as its pay-TV premium channels and online SVOD platform Infinity. It has faced stiff competition from Netflix in those territories since its launch in October, though it was already facing declining subscriptions and has not turned a profit since 2012.

“The Italian market has become very complicated, it is hyper-competitive,” Berlusconi told FT. “It is a media market that has become overcrowded. But we are beginning to see the end of the crisis.”

Mediaset’s shares have fallen about 18% since Vivendi backed out of the deal.